Cookies are often indispensable for websites that have huge databases, need logins, have customizable themes, other advanced features.
Cookies usually don't contain much information except for the url of the website that created the cookie, the duration of the cookie's abilities and effects, and a random number. Due to the little amount of information a cookie contains, it usually cannot be used to reveal your identity or personally identifying information. However, marketing is becoming increasingly sophisticated and cookies in some cases can be agressively used to create a profile of your surfing habits.
There are two types of cookies: session cookies and persistent cookies. Session cookies are created temporarily in your browser's subfolder while you are visiting a website. Once you leave the site, the session cookie is deleted. On the other hand, persistent cookie files remain in your browser's subfolder and are activated again once you visit the website that created that particular cookie. A persistent cookie remains in the browser's subfolder for the duration period set within the cookie's file.
More on Cookies
A cookie is a small file of letters and numbers downloaded on to your computer when you access certain websites. Like virtual door keys, cookies unlock a computer's memory and allow a website to recognise users when they return to a site by opening doors to different content or services. Like a key, a cookie itself does not contain information, but when it is read by a browser it can help a website improve the service delivered.
Cookie files are automatically lodged into the cookie file - the memory of your browser - and each one typically contains:
The website server which sent the cookie uses this number to recognise you when you return to a site or browse from page to page. Only the server that sent a cookie can read, and therefore use, that cookie.
A cookie is a text-only string of information that a website transfers to the cookie file of the browser on the hard disk of computers so that the website can remember who you are.
A cookie will typically contain the name of the domain from which the cookie has come, the "lifetime" of the cookie, and a value, usually a randomly generated unique number. Two common types of cookies are used on most websites-session cookies, which are temporary cookies that remain in the cookie file of your browser until you leave the site, and persistent cookies, which remain in the cookie file of your browser for much longer (though how long will depend on the lifetime of the specific cookie).
Text taken from http://www.allaboutcookies.org/
Read more about cookies here.