"Cached Mode" saves a copy of your Microsoft Exchange Server "cloud" mailbox to your local computer. Your installed version of Outlook (the Outlook client) uses this local mailbox copy when reading and searching email. Your cached mailbox continually syncs changes with the Exchange cloud to keep your mailbox current.
Besides improving email performance, cached mode also allows you to continue work if your network connection is interrupted or unavailable, for example on an airplane. Once reconnected, your cloud and local mailboxes sync any changes that occur.
"Online Mode" directly accesses your cloud mailbox for all of your email work and searches. Since the Outlook client directly accesses your cloud mailbox in online mode, a spotty network connection can interrupt your work. A loss of connectivity means that your mailbox will be unavailable.
Disk space for the local mailbox file created by cached mode is typically not an issue with most computers. Exceptions to this can be tablets which have limited storage capacity for a cached mailbox making online mode a better option.
Cached Mode is recommended and is the default at UWSP.