Cache memory is a smaller and faster memory component located between the CPU and main memory that stores recently used data to allow faster access than main memory. Registers are the smallest memory locations built into the processor itself that can hold small amounts of data or instructions for direct CPU access and processing at very high speeds. The key differences are that cache is an external memory unit while registers are internal CPU components, and cache is used for reading and writing to main memory while registers temporarily store data for active processing.