Facebook uses caching at multiple levels to improve performance and scalability. Caching is implemented globally, with APC, Memcached, and browser caches. Memcached is used to cache user profiles, photos, friends lists, and other frequently accessed data. Caching is optimized through techniques like caching serialization formats, priming APC, and caching parsed user agent strings. Dirty caching ensures cached data is invalidated when the source data changes.