I think the "CAGED" system has more to do with scales. There's the three note per string method for playing modes/scales, and there's the Caged method, whereby you play the whole scale pattern in the space of four frets. It's based upon the five modes created from the notes C-A-G-E-D in the C major scale. Lydian and Locrian are left out as roots.
For example the aeolian mode in the three note system would be -
|-----------------------------------|
|-------------------------6-8-10----|
|-------------------5-7-9-----------|
|-------------5-7-9-----------------|
|-------5-7-8-----------------------|
|-5-7-8-----------------------------|
And the Caged version would be -
|-----------------------------5----|
|-----------------------5-6-8------|
|-----------------4-5-7------------|
|-------------5-7------------------|
|-------5-7-8----------------------|
|-5-7-8----------------------------|
Just different fingerings. Three-note per string is better for speed, and Caged is better if you're trying to play within a certain chord voicing.