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A cookie is a small file or token which is stored on the hard drive of a computer that is visiting a website. The purpose of a cookie is to allow an application on a website to recall information about a visitor and about the visitor's current session. A website has no way of recalling the identity of a visitor when moving from page to page, so using a cookie saves having to re-enter information on every page.
A cookie cannot store any more information about you than what your computer provides. Names and addresses are not automatically recorded - this information has to be specifically requested using a form.
A good example of the usefulness of cookies is the use of password sensitive pages. These pages require re-authentication when moving from page to page, so a cookie is used to store and re-submit the customer's password. Some cookies are used as convenient bookmarks, remembering the page a customer exits from, and automatically landing on that page at the next visit.
Cookies also facilitate e-commerce by assigning and storing a customer's unique reference number for use with a shopping cart. This allows the visited site to immediately see the status of orders and deliveries, etc.