What are cookies?
A cookie is a small text file, typically of letters and numbers, downloaded to your computer when you access websites. Typically, they contain the following information: a site name and unique user ID, the duration of the cookie's abilities and effects, and a random number. As a rule, cookies cannot be used to reveal your identity or personally identifying information.
Generally, the role of cookies is beneficial, making your interaction with frequently-visited sites smoother with no extra effort on your part. Without cookies, online shopping would be much harder. Without cookies, some websites will become less interactive with the cookie option turned off.
Further information can be found at: http://www.ico.gov.uk/for_organisations/privacy_and_electronic_communications/the_guide/cookies.aspx and http://www.allaboutcookies.org/