Principle
Large capacitors have high capacitance and are therefore usually physically larger. They are often made with multiple-layer windings, which results in relatively large parasitic inductance (also called equivalent series inductance, ESL).
The impedance of an inductance increases with frequency, so large capacitors perform poorly at high frequency.
Small capacitors are the opposite: because their capacitance is lower they can be made physically small. Shorter leads reduce ESL, since a length of wire behaves like an inductor, and many small capacitors use a plate structure that yields very low ESL. As a result, small capacitors have good high-frequency performance, but their impedance is relatively high at low frequencies due to the smaller capacitance.
Therefore, to provide effective filtering across both low and high frequencies, a large capacitor is placed in parallel with a small capacitor.
Practical usage
A commonly used small capacitor is a 0.1 uF ceramic capacitor. For even higher frequencies, smaller capacitors can be added in parallel, such as a few pF or a few hundred pF. In digital circuits, it is common to place a 0.1 uF capacitor from each chip power pin to ground. This capacitor is called a decoupling capacitor (or power filter capacitor) and should be located as close to the chip as possible, because the signals at those nodes are mainly high-frequency and are effectively filtered by small capacitors.
