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Varnish is a "web accelerator" that acts as an HTTP reverse proxy, basically Varnish is the front of the line for serving requests. Apache sits behind Varnish and serves requests only to Varnish if the content is not already in the Varnish cache, or cannot be cached for whatever reason. Images, css, html, and a lot of other stuff can be '''[http://wiki.mikejung.biz/Category:Caching cached]''' by Varnish which means Apache does less work, which generally means a happier server and a fast website.
Any time you access something from RAM the access time for that file becomes faster, since Varnish can store a large amount of files in RAM, it can significantly improve performance. I've seen performance boosts of 10x to 100x simply by sticking Varnish in front of WordPress. There is a [https://www.varnish-cache.org/docs/4.0/reference/vcl.html VCL] language that you can use to set rules about what to do with a certain type of request, what files to cache, what files not to cache, and for how long to cache said file.
If you like what you see so far, then continue on reading to find out how to make the cloud faster, or something.