last update: 07.12.2004
.... Cookies were developed to help site builders overcome the anonymous nature of the Web. The technology enables developers to stash a user ID, a session ID, or some other bit of identifying data on the user's machine. That makes it possible for developers to get a sense of whom they're dealing with and what path the user is taking through the site.
So what's the big deal? After all, a client-side cookie is just a calling card, like a "made especially for John Jacob Hammerschmidt" label sewn into the lining of a customer's jacket. A cookie is no more threatening than a bartender who calls out a customer's name as they walk through the door. ....
(More info on Adding cookies to your site, CNET.com)
....Most--if not all--of these claims were patently false. For instance, a cookie can be read only by the site domain that created it, and can store only information supplied by the site or by the user. There is no way a cookie can rifle through the contents of the user's hard drive, nor can it haphazardly broadcast the client's private data across the Internet....
More info on Cookies And Privacy FAQ