See below for information about the two products,
Microsoft Velocity (New and promising) – CTP1 available now
"Velocity" is a distributed in-memory application cache platform for developing scalable, high-performance applications. "Velocity" can be used to cache any CLR object and provides access through simple APIs. The primary goals for "Velocity" are performance, scalability and availability.
Danga Memcached (Old and mature)
memcached is a high-performance, distributed memory object caching system, generic in nature, but intended for use in speeding up dynamic web applications by alleviating database load.
Danga Interactive developed memcached to enhance the speed of LiveJournal.com, a site which was already doing 20 million+ dynamic page views per day for 1 million users with a bunch of web servers and a bunch of database servers. memcached dropped the database load to almost nothing, yielding faster page load times for users, better resource utilization, and faster access to the databases on a memcache miss.
Velocity's final release is due to be release early next year, while MemCache is already available and working à Dilemma.
Few starting points
· Official MemCached site (Simple)
· Velocity overview (Good one)