Theme images in Drupal 7 - The new imagecache is image styles
ImageCache was the Drupal 6 way of doing things when you wanted a modified version of an already existing image on the site. Instead of manually manipulating the image and keeping a copy of it manually, you could setup an ImageCache preset which would be used to manipulate the image automatically.
In Drupal 7, this functionality is now in the core and it has also gone through some subtle changes to keep up with changes in the core.
There is now an image specific function that needs to be called with the relevant information
$img = theme('image_style', array( 'style_name' => 'preset_name', 'path' => 'public://relative/path/to/file/img.jpg', 'alt' => 'Description of image for sight impared and search engines', ));
This should not be called with the more specific theme_image_style() function call as this does not allow other modules to override the function.