The "Collection" is a business-logic class in the system, which represent table in database.
You can think of collection is equal to table in database. 


Some collections are quite often retrieving information too many times from database, and this will lead to poor performance.
For example; Department Listing has a fixed number of records in database.

Instead of keep getting department data from database, eCatalog has function to cache data in memory.
Once the listing is stored in memory, performance will be enhanced greatly.


The "Cache Enabled Collection" allows administrator to set which collection is cache-able and not cache-able.

Please be careful when assigning particular collection into cache-able. Those huge data collection such as Audit Logs is not meant for caching. 
If you set huge data collection to memory, server performance will ended up suffer because it cannot contain huge memory usage.


Usually the system implementor will decide which default collections are cache-able.