Purpose of folder "Ipod Photo Cache"?

Not sure why it should have that much space used. It's purpose it to store meta data about what was synced so when you sync again it can compare current files with what was sent before and see changes.

No, it isn't/shouldn't be automatically deleted. When photos are synced to an iPhone (or iPod), iTunes creates an 'optimized' version of the picture (all the files are of uniform disk size and pixel resolution) and those are stored in the iPod Photo Cache. You can recover that space if you need to, especially if you put a lot of photos on the device that you later removed (by unchecking those albums, for example). If you delete the cache, iTunes will re-create the optimized versions at the next sync (for all the pics on the device).

http://support.apple.com/kb/TS1314

@DaVBMan, as to why it's large, regardless of their original size, 'optimized' pics take up the same amount of space in the cache, for a given device.



Note that this means if you sync the same photo to an iPhone and an iPod Classic, there will be two copies of that photo in the cache, totaling ~1.6 MB for that one pic, +even if the original pic is a 1 megapixel jpg that's only 150 KB in iPhoto.+

I just synced my xmas photos from iphone to pc. They are showing up on my pc under "ipod photo cache" but I can't open to see. It asks me to show what format. Not only that, but it removed all my photos from iphone. How do I see them??