What happens when Gigabit switches are connected over an old CAT5 cable?
To answer the original question without getting too pedantic, they (the active devices/endpoints/Gigabit switches for the commenters below who got confused) will negotiate and connect at the speed they determine will pass over the wire (CAT5 cable connecting them together). You have three outcomes:
Quality CAT5 was used for the interconnect, the run was short enough and care was taken in termination (same goes for patch cables). The devices link up at 1Gbps and nobody knows the difference. You also get lucky and both devices are 1000BASE-T and were designed for CAT5 anyway.
The CAT5 cabling and termination is marginally capable of handling 1Gbps, the devices negotiate and link up at 1Gbps. Annoyance prevails as packet retries and misery come from a connection that mostly functions. In worse situations, the negotiation occurs, but the link fails and you find you have to manually lock the connections to 100Mbps till you take care of the issues.
The CAT5 installation is so marginal that the devices negotiate and connect at 100Mbps with tasty slowness, but are able to pass traffic reliably at the fallback speed.
Needless to say, scenario 2 is one you don't want.
There are 3 types of Cat5 Cables
Cat5(100MHz)
Cat5e(100MHz) (uncommon)
Cat5e(350MHz)
The only one that will reliably connect at 1Gbps is the Cat 5e 350Mhz. Any others would transfer at a slower rate. However, if you do get a Cat5 100Mhz to transfer at 1Gbps over a short (physically short cable) connection then you still run the risk of packet loss.
Cat5 vs Cat5e
• Network support - CAT 5 cable will support 10BASE-T and 100BASE-T network standards, that is it supports networks running at 10 Mbps or 100 Mbps. CAT 5e is an enhanced version of Cat5 that adds specifications for crosstalk (see below). Cat5e cable is completely backwards compatible with Cat5, and can be used in any application in which you would normally use Cat5 cable. However, the added specifications of Cat5e enable it to support Gigabit Ethernet (1000BASE-T), or networks running at 1000 Mbps.
• Crosstalk - Crosstalk is the "bleeding" of signals between one cable into another, due to a process called induction. This effect can result in slow network transfer speeds, and can even completely block the transfer of signals over the cable. Cat5e cable has been improved over Cat5 cable in this respect, and crosstalk has been greatly reduced.
• Bandwidth - The bandwidth of a given conveyance media is essentially it's information carrying capacity. The greater the bandwidth of a system, the faster it is able to push data across a network. Cat5 is rated at 100Mhz while Cat5e is rated at 350Mhz. This coupled with other more stringent specifications makes Cat5e ideally suited for networks which plan to operate at Gigabit Ethernet speeds.
• Bottom Line: If you plan on to implement Gigabit Ethernet, go with Cat5e. Also, the small increase in price of Cat5e over Cat5 is more than made up for by "future proofing" your network's cabling infrastructure.
Other note: if you're planning to run networking cable next to power lines and expect to get reliable 1Gbps speeds, you will want Cat6. Cat6 and Cat5e are basically the same except that Cat6 is certified to for gigabit speeds. It has better insulation of the twisted pairs and will handle running next/near power lines better.
The switches have no idea what cable is used between them. The only difference between Cat 5 and Cat 5e is that Cat 5e has stricter standards for interference between wires; there's no real difference between the actual cables, and all Cat 5e cables also comply with the Cat 5 spec).
Gigabit Ethernet just requires Cat 5, not Cat 5e (the connection may be better with 5e, but it works fine with 5).