I'm looking at

The name of the function suggests "You get the current item according to a key, and replace that with a new item".

The following is a piece of code where we already found the item in the current cache. The above description matches the if branch but not the else branch of the code below.

Why are we not updating trackable.Item with factory() like the function name suggests?

To summarise what the function does
We update trackable.item if:

• the item was found in the cache and its previous state was DELETED
• the item was not found in cache and not in the real DB

We do not update trackable.item if:

• the item was found in the cache, but it's previous state is CHANGED or ADDED
• the item was not found in cache, but found in the DB.