Report Caching efficiencies

Last night at the PDX Qrew meetup, it was recommended that we use report caching. Today I am using report caching. After reading the documentation, that doesn't really describe what is happening or where the report data is saved or how it knows the table is updated or anything really other than you can turn it on... I am lead to this question. 

What is the most efficient setting when enabling Report Caching?

To me below makes the most sense but I don't really know what will happen or how it will change the Apps behavior. 

Anyone want to speculate?