In this article Sergey Barskiy talks about assembly caching in Silverlight 3.
In Silverlight 2.0 all assemblies that your application needed would have to be included in your XAP file(s). In Silverlight 3 you can force browser to cache one or more assemblies that your application needs. In case of caching your can tell Silverlight runtime to pull these cached assemblies from a predefined location. This location can be the same folder as your Silverlight XAP file or anywhere else on the internet.