The volume-of-flow method combined with the Rayleigh–Plesset equation is well established for the computation of cavitation, i.e., the generation and transportation of vapor bubbles inside a liquid flow resulting in cloud, sheet or streamline cavitation. There are, however, limitations, if this method is applied to a restricted flow between two adjacent walls and the bubbles’ size is of the same magnitude as that of the clearance between the walls. This work presents experimental and numerical results of the bubble generation and its transportation in a Couette-type flow under the influence of shear and a strong pressure gradient which are typical for journal bearings or hydraulic seals. Under the impact of variations of the film thickness, the VoF method produces reliable results if bubble diameters are less than half the clearance between the walls. For larger bubbles, the wall contact becomes significant and the bubbles adopt an elliptical shape forced by the shear flow and under the influence of a strong pressure gradient. Moreover, transient changes in the pressure result in transient cavitation, which is captured by high-speed imaging providing material to evaluate transient, three-dimensional computations of a two-phase flow.