Normal Cache is any temporary information created or used by an app.
Dalvik Cache is a program cache area for the program dalvik. Dalvik is a java based virtual machine that is the bases for running your programs (the ones that have the .apk extension). In order to make access times faster (because there's not JIT (just in time) compiler installed by default), the dalvik-cache is the result of dalvik doing a optimization of the running program. Sounds confusing. It's similar to the prefetch files in Windows.
When you full wipe the normal cache is being deleted automaticly. Dalvik cache is being deleted manually via any recovery. Under Advanced in CWM.
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