Is Terracotta a distributed cache?
Although you don't specify which product you are talking about, I'm going to assume you mean the open source platform itself. The short answer is no, but it can be used to write a distributed cache, and it has been in one of their own products (Ehcache).
You can see an overview of what the core engine is about here (it seems that they are hiding the information on their open source platform behind a registration wall now). It is a clustering engine that does not use J2EE technology, and its main purpose is to simplify distributed computing development. Besides caching, obvious use cases involve high availability and scalability needs. Think of it as enabling relatively plain java code to run "in the cloud" without having to worry about a lot of the details that that might involve.