Using action caching means that the request will go through Action Pack so all the filters are processed before the page gets served. That way you can use authentication and other magic in your pages without having to give up the glory of caching.
The most granular way to do caching in Rails is fragment caching. It’s what the two higher-level caching schemes use internally. Using fragment caching is a gem when you have pages that have both highly dynamic and pretty static parts. The downside is that it’s a bit more work and you have to do it in templates.