Clearing the cache on the Xbox 360 is a fairly simple process, and can be useful if the system seems sluggish, unresponsive, or you just need to get rid of a game update (for whatever reason).
The most important part of clearing the cache is knowing what to expect. All downloaded game updates will be removed. So if you have downloaded an auto-update for a game, in order to play it on Xbox Live you will need to re-download it.
User game saves, profiles, demos, videos, etc. are not deleted during the process.