The CAGED System is a powerful method for navigating the fretboard and connecting various chord shapes and scales.
Let's look at how we can begin to use it for ourselves.
First off - you need to learn the CAGED shapes. The best way to drill these is by learning them as The CAGED Arpeggios. Once you've done that, you're ready to go.
Now - we've used these shapes in two ways already. Originally, we learned these shapes as open chords. But, as you've already seen by making barre shapes from E and A, they can be used all over the fretboard to form chords. For example, below we have options for playing a C# Major Chord with all 5 CAGED shapes.
(The G shape is a tough barre, and won't be often used, but it is doable!)
Of course, you can flesh out any of these shapes by making them the full arpeggio shape you learned previously, as well.
The CAGED shapes also fit in great with the Pentatonic Forms! Look at how we can fill the shapes out with Pentatonic notes. Soloing over a chord with this chart in mind, sticking primarily to the chord tones, and using the pentatonic notes as passing notes and "color tones" will keep you beautifully connected to the chord being played.
You can also use the CAGED shapes to get started Visualizing Triad Inversions. This is covered in more detail at that link!
This is just scratching the surface here, as the CAGED system is a flexible enough framework to work with just about everything we do on the guitar, including our scales and modes.
While so far we've only discussed it in terms of Major, Minor, and Dominant 7th, remember that you can modify the shapes to fit your needs! For example, Sus2, Sus4, Maj7, Min7, Min7b5, and many more chord shapes can be worked with in this way if you know how to modify your CAGED shapes.
Where and when you apply the CAGED System in your own playing is a matter of personal preference, but I hope you can now see how incredibly useful this method of thought can be! It might even change how you see the fretboard permanently.