Search engines do care about case.
Capitalization doesn't affect your rankings directly; however, if you have links to a page both in caps and lowercase, the search engine will view it as two distinct pages. You begin to run into duplicate content issues. Depending on your server, example.com/Page1 and example.com/page1 are two different pages, but search engines will always view them as separate URLs.
From a usability perspective, use lowercase. As a user, I don't want to pay attention to capitalization when I'm typing in a URL.