PostgreSQL uses the operating system's disk cache.
... in addition to its own buffer cache, which is stored in shared memory. You're correct though, in that the best practice is to keep the PostgreSQL cache small and give more memory to the operating system's disk cache.
Pgsql uses the OS's disk cache instead of its own cache management because the former is more likely to persist. If the postmaster managed the cache, as soon as the last connection died, the memory allocated for caching would be released, and all the cached data would be lost.
No; the cache is stored in shared memory. It wouldn't persist over postmaster restarts (without some scheme of saving and restoring it), but that has nothing to do with why the OS disk cache is usually kept larger than the PG shared buffer cache.
-Neil
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