From the Blender Reference Manual:
“Baking Physics Simulations
“Baking refers to the act of storing or caching the results of a calculation.
“It’s generally recommended to bake your physics simulations before rendering. Aside from no longer needing to go through the time-consuming process of simulating again, baking can help prevent potential glitches and ensure that the outcome of the simulation remains exactly the same every time.
“Most physics simulators in blender use a similar system, but not all have exactly the same settings available. All the settings are covered here, but individual physics types may not provide all these options.”
More on the settings for baking smoke and fire simulations:
More on the settings for baking fluid simulations:
More on the settings for baking ocean simulations:
More on the settings for baking rigid body physics simulations:
In addition to simulations, you can also bake textures:
“Baking, in general, is the act of pre-computing something in order to speed up some other process later down the line. Rendering from scratch takes a lot of time depending on the options you choose. Therefore, Blender allows you to “bake” some parts of the render ahead of time, for select objects. Then, when you press Render, the entire scene is rendered much faster, since the colors of those objects do not have to be recomputed.
“Render baking creates 2D bitmap images of a mesh object’s rendered surface. These images can be re-mapped onto the object using the object’s UV coordinates. Baking is done for each individual mesh, and can only be done if that mesh has been UV-unwrapped. While it takes time to set up and perform, it saves render time. If you are rendering a long animation, the time spent baking can be much less than time spent rendering out each frame of a long animation.” (Check the rest of this link https://www.blender.org/manual/render/workflows/bake.html for more useful details.)
Render Backing for Cycles
Refer to the Blender Render page at https://www.blender.org/manual/render/workflows/bake.html for general baking guidelines
“Cycles uses the render settings (samples, bounces, …) for baking. This way the quality of the baked textures should match the result you get from the rendered scene.
The baking happens into the respective active textures of the object materials. The active texture is the last selected Image Texture node of the material nodetree. That means the active object (or the selected objects, when not baking ‘Selected to Active’) needs a material, and that material needs at least an Image Texture node, with the image to be used for the baking. Note, the node doesn’t need to be connected to any other node. The active texture is what projection painting and the viewport use as a criteria to which image to use. This way after the baking is done you can automatically preview the baked result in the Texture mode.”