To start with the last question: You can delete the Cache directory without any problems. It is even good to do so every now and then to reclaim some disk space.
The Images subdirectory hold the squigglies you see in track events, the Audio subdirectory holds re-rendered audio files after e.g. stretching or transposing. Stretch a track event 10 times and you get 10 new audio files in the cache (using only one). The content (as far as it is still needed) after binning the Cache directory will be reconstructed when you re-open the song. Depending on the song that may take some time (caching allows songs to open faster) but then everything will be back to normal, with a Cache directory which now only contains stuff still needed.
NB. Open a song with deleted Cache folder and observe the Cache Activity meter bottom left on the screen. It is wise to wait until caching has completed before you start editing or before closing the song. A half-cached song will not open correctly. In that case delete the cache folder again and re-open the song.