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What the term resources refers to is a very misunderstood thing, and a somewhat complicated thing (which is probably why it's misunderstood). Windows has two core 32-bit system files called User32.dll and GDI32.dll, which you can find in your System directory. User32.dll deals with elements of the user interface, such as creating windows. GDI32.dll is the graphics device interface, which is responsible for drawing graphics on your screen.
When programs need to exchange information with these files they do so through a little chunk of memory called a heap. With newer 32-bit programs and operating systems, each program can create it's own heap. But older 16-bit programs must share one common heap. So in Windows 3.1, a couple 64 kilobyte segments of memory were set aside as heaps for accessing the User and GDI functions. These two heaps are what System Resources refers to.
While a true 32-bit operating system like Windows NT or Windows 2000 doesn't need to worry about resources, Windows 95/98 and ME retain many 16-bit elements for backwards compatability. The System Resources gauge on CacheMaster is simply a combination of the User and GDI resources. The gauge shows how much of the combined User and GDI memory heaps are in use. The more programs you have running, the more heavily your resources will be used.
There have been some misconceptions about this topic. Should you be concerned if your resources are often being heavily used? Is there anything that can be done about it? To answer both: not really. The amount of resources you have has nothing to do with the amount of memory you have or how fast a processor you have or anything else like that. Everyone has exactly the same amount of resources. There's usually no reason to be concerned about the amount of resources in use unless it's up in the area of 95% or higher, in which case you might start having things freeze up on you.
To avoid heavy resource use you can avoid using too many programs at once. If you're seeing constant heavy resource use, look to see how many little icons you have down in the tray by the clock. If you have quite a few, then figure out which ones you don't need running and get rid of them.
You might also see heavier resource use if you leave your computer running for long periods of time. In theory, programs should release the resources they use when they're shut down, but unfortunately they don't always do this. So if you're one that leaves your computer running all the time you're likely to see much heavier resource usage as programs are opened and closed over the course of days or weeks. It's a good idea to reboot your computer at least every couple days to avoid these kinds of issues. Finally, avoid using older programs which will use more 16-bit components and thus more resources, and stick to newer 32-bit software.
On a related note, if you've ever had your entire computer freeze up (which I'm sure you have), it was due to 16-bit programs or dll's. Since 32-bit components run completely independant of each other they can only freeze themselves. But 16-bit components all use the same resources, and are essentially treated by Windows as one single component. So if one freezes they all freeze, and that includes the 16-bit parts of Windows as well. All the more reason to avoid using older software! See the CPU priority & stacks topic for more information.