What is external page caching in Drupal? How is it different from the intrinsic caching mechanism in Drupal?
External caching could be something like Varnish. It makes it possible to deliver content without using php / Drupal / mysql and is thus very fast. I'm not sure the exact magnitude, but the same server could probably show 50-xxx times more pages per second from Varnish cache than from drupal cache.
So you can delivery a lot of content without using much server power doing it.