if (-f $document_root/cached_pages/$uri/index.html) { rewrite (.*) /cached_pages/$1/index.html break; }

The if condition checks whether the file at the specified path exists. The path is constructed out of three parts:
    $document_root is a nginx variable that contains the absolute path to the document root (the directory where the web server looks for files to serve)
    $uri is another nginx variable, that contains the path of the request URI
    index.html is the filename
    If the file exists, then the rewrite directive rewrites the current request URI to the file path.