WAAS Interception methods

WAAS relies on some form of network interception to integrate into the network and receive packets from flows that are to be optimized. WAAS supports four methods of network interception listed below:

Physical inline interception

The WAE appliance (the router integrated network module does not support physical inline) is deployed physically between two network devices, most commonly between a router and a switch in a branch office. This allows all traffic traversing the network toward the WAN or returning from the WAN to physically pass through the WAE, thereby giving it the opportunity to optimize or unoptimize. Physical inline can be used in any type of location (branch office, regional office, data center), but is commonly used for branch office implementations.Normally this is not used much because of the scalability factor  .

Policy-Based Routing (PBR)

The WAAS devices support PBR, which provides an off-path but virtually in-line deployment. With PBR, WAE devices are deployed as appliances (nodes on the network and not physically in-line) and policies are configured within the layer-3 topology that will route traffic going to or coming from the WAN through the WAE device first. PBR provides high-availability and failover capabilities (requires use of CDP neighbor checking or IP SLA) but does not provide load-balancing. Cisco Advanced Services does not recommend PBR as intercept method as it adds complexity for maintainability and troubleshooting.
I have seen issues with this, as this require switch TCAM programming only , which sometimes require lots of memory .

Web Cache Communication Protocol version 2 (WCCPv2)

All WAAS devices (appliances and network modules) support WCCPv2, which provides an off-path but virtually in-line deployment. With WCCPv2, WAE devices are deployed as appliances (nodes on the network and not physically in-line) on the network. WCCPv2 provides scalability to 32 WAE devices in a service group, load-balancing amongst WAEs, fail-through operation if all WAEs are unavailable, and allows the administrator to dynamically add or remove WAE devices to the cluster with little to no disruption.

Cisco Application Control Engine (ACE)

WAE appliances (not applicable to the router-integrated network module) can be integrated into the network using the Cisco ACE appliance or module for the Catalyst 6500. Using ACE, Cisco WAEs are
deployed as appliances (nodes on the network and not physically in-line) and are configured as part of a server-farm within the ACE configuration. As of today, ACE provides ultra-high levels of scalability - up to 64Gbps of load-balanced throughput in a single chassis, up to 16 million TCP connections, and load-balancing for hundreds of WAE devices - and is the premier means of integration into the data center network.