@Ricky Actually there are different kinds of software updates and sources for those updates, even though they all get presented to you in the Mac App Store application. Updates/downloads for Mac App Store applications can be cached using the caching service in OS X server. This feature doesn't require JAMF. You just put the OS X Server box on a network reachable by the clients and using the same public IP on the internet and the caching service registers with Apple. When the clients check in Apple sees them coming from the same public IP and then redirect the clients to the local caching server to get updates. If the caching server doesn't already have the content being requested it will download it and pass the bits through to the client while caching it off to the side so users after the first user will pull it directly from the caching server. JAMF doesn't really come into play here.
The feature you are seeing in the JSS is for the kind of updates you would have seen come for Software Update in older versions of OS X. Things like iTunes updates, OS X point updates, etc. With those kind of updates, they are mirrored on OS X Server using the Software Update service which is a separate service from the caching server one. You turn it on and then it starts mirroring Apple's catalog of updates but you can disable certain items you don't want to be available when a client checks in. The client then will pull whatever updates you have made available directly from the server you specified. For a client to look to this software update catalog though it has to be pointed to it. It doesn't happen automatically. The options in the JSS for setting the Software Update server for clients is what this is for. You can have the JSS handle setting that setting for you with clients.
If you don't have or don't want to use OS X server, there is a third party implementation of the software update server called Reposado.This is what the NetSUS appliance JAMF makes available uses under the hood.
