Cache replacement refers to the process of deciding which data to remove from a cache when it becomes full and new data needs to be stored. Caches are temporary storage areas that hold frequently accessed data to speed up retrieval times. When the cache reaches its limit, the system must choose an existing item to evict, ensuring that the most relevant data remains available. Various algorithms are used for cache replacement, such as Least Recently Used (LRU) and First In, First Out (FIFO). These algorithms help optimize performance by predicting which data is less likely to be needed soon, thus improving overall efficiency in data retrieval.