What is the purpose of a cache directory?

Can anyone explain what is the purpose of a cache directory? Does it make uploading faster/slower? What happens if I don't allow cache to be store

All the cache modes are explained here:

So if I disable it then VFS might not be as compatible. But what happens if I just limit the size to let's say 1GB, but still --vfs-cache-mode full

It depends on what your use is and what mode could be the best.

Full tends to help for streaming but requires enough cache space to store whatever you plan to stream concurrently.
Write tends to help if you get an error while writing to a mount
None if you don't see any caching but it all depends on what you are doing.

So it I want to upload from the google drive to let's say MEGA I need to make sure it's --vfs-cache-mode full and also have enough space in the cache storage for the file that's being uploaded?

No, cache dir is only for mounting.

If you are copying from one remote to another remote, you wouldn't be using a mount most likely so no need for caching.

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