So we had our host install memcache and have selected it in the admin of our forum but how do we know it's working or setup properly? Is there any specific settings on the server we should be getting our host to set for optimal use of memcache and our forum? 

You shouldn't leave it enabled, but you can use constants.php to enable the Caching log which will tell you if it's loading anything from Memcache or not.

\define( 'CACHING_LOG', TRUE );

That being said, though, we generally recommend Redis now.

Ok thanks, so that seems to show a load of code in a panel so I am guessing it's doing something. 

Yes, if items are appearing in the sidebar, then they are being loaded from the cache engine you've enabled.