As per the IIS Output Caching documentation,
"Kernel Mode Output cache does not support modules and features that must run in user mode, such as authentication or authorization. Example: If authentication schemes like Basic or Windows authentication are enabled, the cache policy will not work. "
What is basic authentication and Authorization in "If authentication schemes like Basic or Windows authentication are enabled, the cache policy will not work" statement?
My ASP.NET MVC 3 web application has Forms authentication. Will Kernel mode caching works for my site?