(FORTUNE Magazine) – One of the frustrating things about tech stock investing is that there's always a new buzzword to learn. It used to be a tongue twister like "enterprise-wide resource-planning software." Then came the Internet and its attendant jargon: "portals," "business to business (B2B)," and "application service providers." Now there's a new buzzword tech investors need to know--"caching." As with the others, understanding why caching is clicking opens the door to a slew of stocks that are generating huge returns for daring investors. Take cache play Cobalt Networks, which went public on Nov. 5 at $22 and now trades for more than $130 a share.

What exactly is Internet caching? Basically, it's the process of storing information physically closer to users so that ISPs that deliver content don't have to go back to the source every time someone requests that content. It sounds complicated, but in the "real" world it's akin to finding ways for a magazine distributor to deliver numerous publications to a newsstand so that a merchant doesn't need to phone, say, FORTUNE, every time a customer wants a copy.

For a while, the conventional wisdom was that Web performance would improve as soon as the average user acquired more bandwidth, eliminating downloading delays. But it turns out that all sorts of things clog the system, from inefficient traffic management to insufficient computing power. And everyone is still desperate for faster Web access--hence the need for caching. More to the point, that is why the companies that supply the cache are raking in the cash from investors.

Stalwarts of the caching game include Inktomi and Network Appliance, each a Silicon Valley veteran--defined in Internet time as a company founded roughly before 1998. They provide hardware and software to store key pieces of information near the consumer, not the supplier. In practice, they supply server devices to network operators like AOL. These products can be used to speed up Web traffic significantly, and not surprisingly shares of both Inktomi and Network Appliance are very hot. "If you cache those objects much closer to the end user, you don't need to go back to the Internet," says Dan Warmenhoven, president and CEO of Network Appliance. "You just deliver the content."

But with all the new and old telcos furiously adding data lines around the world, won't we eventually have so much bandwidth that caching becomes irrelevant? Not necessarily. "Even if you have infinite bandwidth, you still have user-experience problems because of overloaded servers," says Warmenhoven. "If you provide more bandwidth, people have a way of wanting more, richer content. The problem never goes away."

That's why Wall Street, and Sand Hill Road, the home of Silicon Valley's venture capital community, are both throwing ever more money at solving the problem. In recent months the cache field has become crowded with feisty upstarts. In addition to Cobalt, a likely hot IPO is CacheFlow, which has backing from VC powerhouse Benchmark Capital. Plus, there's Entera, an under-the-radar operation that recently recruited Cisco board member Steve West as its CEO. Entera hasn't disclosed any plans to go public. In the meantime, established players like Cisco and Novell are beefing up their presence in the cache arena.

Having appliances that store Web content closer to the users is only half the battle, however. What about Web pages that need to be refreshed frequently? For example, just having a weather report or sports score stored near a user doesn't do a bit of good when data can change within a few minutes. CacheFlow, for one, boasts in its IPO filing of technology that monitors host networks for the need to update information.

Another element of the cache boom isn't a device but a service that radically speeds up the delivery of images so that Web pages download faster. One major player in this niche is Akamai, which uses its network of servers to decide the best way to deliver the content to the user who has requested it. That way it's not just storing the information but making an intelligent decision each time a request comes through.

Investing in the cache cows, however, presents a whole new set of challenges. Investors were so excited by Akamai's potential that they bid up shares of the company (which has recorded just $1 million in revenues) from an IPO price of $26 in late October to $180 by mid-November. That gives Akamai a valuation of $16 billion (neither the "16" nor the "b" is a typo).

So is cache just the latest tech fad, or is it here to stay? Well, assuming the Internet keeps growing and users keep craving speed, caching companies are likely to be hot investments for some time. But with cache-oriented stocks like Akamai and Cobalt (which jumped nearly sixfold on its first day of trading) heading directly for the moon, the average investor may want to wait for these highfliers to take an inevitable breather.

ADAM LASHINSKY is the Silicon Valley columnist for TheStreet.com. You can browse his Wired Investor columns at www.fortune.com/investor/wired or e-mail him at alashinsky@thestreet.com.