Cookies are small files that Web sites put on your computer hard disk drive when you first visit.
Think of a cookie as an identification card that's uniquely yours. Its job is to notify the site when you've returned. Cookies should not be confused with viruses. While it is possible to misuse a cookie in cases where there is personal data in it, cookies by themselves are not malicious.
Cookies can help you be more efficient. Have you ever put something in a virtual shopping cart in an online store and then returned a few days later to find that the item is still there? That's an example of cookies at work.
Cookies let you store preferences and user names, register products and services, and personalize pages.
But if you never register or leave personal information at a site, then the server only knows that someone with your cookie has returned to the Web site. It doesn't know anything else.
You're in charge of deciding whether we know anything about you.
For a more detailed explanation, see Microsoft Help and Support: Description of Cookies