Gremlin Cages are cages that contain trapped Gremlins. They can be found all throughout Wasteland, as Mickey Mouse travels in his quest. They can be broken by using Oswalds electricity and then Mickeys spin attack before the shield can turn back on.
AppearanceIn the beta version of the game, Gremlin Cages had two metal plates as the top and bottom, connected by metal bars similar to those found in jail cells.
In the final game, the Cages still have the metal plates, but instead of jail cell-like bars, thay have metal bars connected by glass plates.
After the Thinner Disaster happened, the Gremlins still battled the Blot's forces. Since the Mad Doctor was an ally of the Blot, he invented cages to imprison the Gremlins. According to Bennet, the reason that the Gremlins can't simply teleport out is that Doc designed the cages specifically to prevent this, although how they prevent it is unknown.
When Mickey arrives in Wasteland, he encounters all of the caged Gremlins. If he chooses, he can break them out of prison. If he frees all 30 of them, near the end of the game ("Inside the Blot") Gus gives Mickey the Special Gremlin Guardian Pin.
If you did not free all of them or, even worse, none of them, they presumably stay trapped inside after the events of the game.