Think of it like this. You wait in line, get to the service window and explain your whole situation, who you are, what you want, why you're there, and on and on. The person in the window hands you the piece of information you asked for and you walk away. Then you turn around to ask for just one more thing and the service rep looks at you with a blank expression and says, "Who are you?" You have to start all over again with who you are, what you want, etc., right from the beginning. That's how the Web works, only much faster. Your browser connects, asks for something (like a Web page) then disconnects. You look at the page, click on a link, and the connection process begins all over again.
Cookies are how the Web fakes persistence. When a Web site needs to remember something about you it sticks it in a cookie and stores it on your computer. This way it can find it again later. Say you visit a Web site and the page asks for your name. You type in "Harvey" (because you always liked that name) and you leave. But before you go, the Web site sticks "Harvey" in a cookie, a cookie that only this Web site knows about. The next time you surf this site again it asks your browser for the cookie, the browser coughs it up (sorry, poor choice of words) and when the page displays it, it says, "Welcome back Harvey!" It knew it was Harvey because that's what was stored in the cookie. And it had to be stored on your computer because the Web server has no way to identify you the next time you connect to it.
If you use Navigator your browser cookies are stored in
the cookies.txt file, typically stored in
C:\Program Files\Netscape\Users\your_profile_name\cookies.txt.
Internet Explorer stores your cookies under the main Windows
folder, typically C:\Windows\Cookies with each cookie being
an individual file.
So are they a good thing or a bad thing? Well, generally they only store things you (or your browser) tell a Web site, or things the Web site wants to remember about you. Like the last time you visited, what the order number was on the purchase you just made. Stuff like that. But if having cookies bugs you, you can tell your browser not to accept them. Or use a utility that lets you selectively use or avoid cookies as you see fit.

