Cache memory is a small, fast memory located close to the CPU that stores frequently accessed instructions and data from main memory. It improves performance by reducing access time compared to main memory. There are three main characteristics of cache memory: 1) it uses the principle of locality of reference, where data that is accessed once is likely to be accessed again soon; 2) it is organized into blocks that are transferred between cache and main memory as a unit; and 3) it uses mapping and tagging to determine if requested data is in cache or needs to be fetched from main memory.