When a new block must be brought into the cache and all the positions that it may occupy are full, a decision must be made as to which of the old blocks is to be overwritten. In general, a policy is required to keep the block in cache when they are likely to be referenced in near future. However, it is not easy to determine directly which of the block in the cache are about to be referenced. The property of locality of reference gives some clue to design good replacement policy.
Since program usually stay in localized areas for reasonable periods of time, it can be assumed that there is a high probability that blocks which have been referenced recently will also be referenced in the near future. Therefore, when a block is to be overwritten, it is a good decision to overwrite the one that has gone for longest time without being referenced. This is defined as the least recently used (LRU) block. Keeping track of LRU block must be done as computation proceeds.
Consider a specific example of a four-block set. It is required to track the LRU block of this four-block set. A 2-bit counter may be used for each block.
When a hit occurs, that is, when a read request is received for a word that is in the cache, the counter of the block that is referenced is set to 0. All counters which values originally lower than the referenced one are incremented by 1 and all other counters remain unchanged.