When you run sudo apt-get update (or use the Refresh button in a package manager), a list of packages will get downloaded from the Ubuntu servers. These files are then stored in /var/lib/apt/lists/.

You can safely remove the contents of that directory as it is recreated when you refresh the package lists. If you remove the files, but do not run apt-get update to fetch the lists, commands like apt-cache will fail to provide information (since the cache is empty).

To shrink the directory and speed up fetching package lists, consider disabling some repositories that you do not need (see How to remove a repository?). This includes PPAs (see also How can PPAs be removed?)