Things change rapidly in the WordPress world. The content in this post is more than a year old and may no longer represent best practices.
Stefan Didak gave a dizzying high-speed presentation explaining the secrets behind managed hosting and really fast WordPress sites, starting with an overview of the way caching works in WordPress and continuing on to cover
- OpCode Caching
- Apache vs. Nginx
Note that these tools only work if you are managing your own server.