From the Documentation

Use File Cache

Enables the storing of geometry information into a "cache" file in the directory specified by the system's TEMP (for Windows) or TMPDIR (for UNIX) environment variable to reduce the amount of memory used to store geometric data. Turning on this option lets the renderer perform its own swapping.

Note on temporary directories

if TEMP is set, it uses that directory provided it's writable. If not writable, a warning message displays.
If the above still fails to find a temporary directory, a final attempt will be made to set the current directory you are working in as the temporary directory.

Note

Use File Cache helps to prevent maxing out memory bandwidth and diskspace when you are rendering a heavy scene on a multi-processor machine.

Before rendering really huge scenes, type:
SET TEMP=<NAMEOFDIR>

where <NAMEOFDIR> is the location of a partition with lots of disk space.

Might be having trouble finding that directory,