Quick answer
Use full-page cache for reusable HTML, object cache for repeated application and database work, and edge cache/CDN for geographically distributed delivery.
Full-page cache
Stores generated HTML so repeat public requests can bypass most WordPress and PHP work.
Object cache
Keeps frequently used objects and query results in memory, helping dynamic or logged-in requests that still execute WordPress.
CDN and edge cache
Stores static assets and sometimes full pages closer to visitors, reducing latency and origin load.
Where Cloudways enters the decision
Cloudways exposes several of these layers through its stack, Redis and Object Cache Pro plus Cloudflare options. The correct configuration still depends on the application and which pages must remain dynamic.