A cascaded service is one where an external server provides the WMS and/or WFS service that your local instance of GeoServer connects to and then passes through to your end clients. The service cascades through your implementation of GeoServer, and then moves on to the end users.

End users of a cascaded service do not know that they are actually in receipt of cascaded data unless something within the data or metadata indicates that they are. To all intents and purposes, they will consider it to be data that is controlled and hosted by you.