What is Varnish?

Varnish is web application accelerator. More specifically, its a 'caching HTML reverse proxy'. Let's take a second and unpack what that means and why it's awesome.

One of the features that really sets Drupal apart from other CMSs is its' filter system - the ability for Drupal to run standard text data through functions, called filters, that will alter the text in some useful way. Out of the box, Drupal 7 offers several filters by default. For example, the 'Filtered HTML' input format will run several filters, doing things like removing potentially harmful javascript, closing missing HTML tags, and adding paragraph tags where appropriate.

What's Memcached?

Memcached is a free and open-source distributed memory object caching system designed to speed up dynamic web applications by alleviating database load. It allows traditionally expensive (in terms of server CPU and RAM) database queries to be pulled from the Memcached server instead of your database.