FranDeStadler I started a thread on What is the CAGED system (P.s. This thread is a Sponsored ad for Guitar King. Norio is a not affiliated with Guitar King, me neither)
From what I understand, you;d apply the shapes (Position 1 being the C shape) - relative to the key your playing in. As I think you've described. So if I took the default CAGED shapes (Major chords), and jammed to a progression the Key of C, I'd have all the major scales notes to jam with. That would have a kinda nursery rhyme vibe to it (it's how i hear the major scale).
Where I found the CAGED theory real useful (vs The Blues Scales/Minor Pentatonic Shapes) - was being based around chords I knew (major/minor/7th's etc) I started to think vertically to connect chord shapes instead of laterally (E string to E string) running up and down a scale.
Certainly added a more melodic approach/feel to what I was playing.
