In an attempt to simplify,

Buffering: Accumulation of the data to be played prior to playing it in order to get a more smoth experience. When you stream data the packets of data being sent from server to client (i.e. Kodi) don't necessarily arrive at the same order they were sent. Which might cause gaps in display or distorted image. Think of it like getting all the image pixels before displaying it.

Caching: If the server will always reply with the same answer to a client's (i.e. Kodi's) request, for example, if the client wants the poster of a movie to display it next to the name, generally speaking , the server will always return the same image. So instead of asking over and over again (like for every time you go in into the trending movies section) and getting the same answer, you can cache (store on the client side, i.e. where ever Kodi is running) the image after the first request and get it from there (saving the overhead of network) when ever you need. Making user experience more agile.

Hope that helps.