Cookies – History – What they do.
“To enhance your online experience, the makers of Web browsers, such as Netscape Communicator and Internet Explorer, have invented a type of special message that enables a Web site to recognize you when you revisit that site. They thoughtfully store this info, called a cookie, on your very own machine to make your next visit to the same site smoother.
Usually this info can in fact make your next transaction smoother. When you're using an airline reservation site, for example, the site uses cookies to keep the flights you're reserving separate from the ones other users may be reserving at the same time. On the other hand, suppose that you use your credit card to purchase something on a Web site and the site uses a cookie to remember your credit card number. Suppose that you provide this information from a computer at work and the next person to visit that site uses the same computer. That person could, possibly, make purchases on your credit card. Oops.
It may be true that cookies can make your life more convenient. You have to be the judge. Every Web server can offer you cookies. You need to know that this kind of software exists so that if you're concerned about your privacy, you can take steps to protect it.
Cookie files usually have the name cookie associated with them — cookies.txt on Windows and MagicCookie on a Mac, for example. You can delete your cookie files — your browser will create a new, empty one. Modern browsers can tell you about cookies and ask you whether to accept them as servers offer them to you.
Contrary to rumor, cookie files cannot get other information from your hard disk, give you a bad haircut, or otherwise mess up your life. They collect only information that the browser tells them about.
In addition to the cookie file, Internet Explorer keeps a history file of where you've been on the Web. (Look in your Windows folder for a subfolder called History.) If anyone other than you uses the computer you use, you may want to delete its contents after your use, unless you don't care who sees it. Courts have ruled, by the way, that companies own their computers and their contents. You have no "right to privacy" at work, even though most of us find the idea creepy. Companies can eavesdrop on phone calls, read your e-mail (going and coming), and read anything on your computer, including a history file detailing where you've searched. This can be problematic if you've done a little unofficial surfing at lunchtime.”
Source: The Internet for Dummies