It is an internal full page cache for Magento. This Cache needs no varnish or any other external software and works with events. It is an internal cache and so it replaces dynamic blocks before sending the response to the customer.Lesti works by caching the entire HTML output of a page. By default, it only caches CMS pages, Category Pages, and Product pages. There is no reason to cache other pages unless they are slow to render and highly trafficked.

Lesti provides 2 methods to update the cache with dynamic content:

DYNAMIC BLOCKS
Dynamic blocks are all blocks which should be regenerated on every page view (even for cached pages). These blocks are usually message blocks (e.g., Global Messages). Lesti updates them through the aforementioned hole punching process.

LAZY BLOCKS
These are most of the blocks you will interface with. Dynamic blocks are blocks which are different for each user but can be cached in the user session. For example, the top links are a lazy block as they contain the number of items in the cart and the logged in / logged out links. Lesti regenerates all Lazy Blocks whenever a Refresh Action occurs.