Cookies are small pieces of data stored as text on the client's computer. Normally cookies are used only to store small amounts of data, including user preferences, time and more. Even though cookies are not harmful some people do not permit cookies due to concerns about their privacy. In this case you have to use Sessions. 
Cookies were first introduced by Netscape. PHP allows easy setting and retrieving of cookies.
Setting a cookie is extremely easy with ''setcookie()''http://php.net/manual/en/function.setcookie.php.
Syntax:
 bool setcookie ( string name [, string value [, int expire [, string path [, string domain [, bool secure]]]]])
where name is the cookie name, value is the data to be contained in the cookie, expire the time after which the cookie should expire, path the path on the server which can use the cookie, domain can be used to set permissions for subdomains and secure if set true only transmits the cookie if a secure connection is present.
Since all cookies are sent by the server along with HTTP headers you need to set any cookie at the start of a page before any other code. You will normally only need to use the name, value and expire arguments. If expire not set the cookie will expire when the client closes the browser.
Examples:
setcookie("wikibooks", "user", time()+3600);
The above code will set a cookie having the name wikibooks, value user and will expire an hour after it is set.
 setcookie("test", "PHP-Hypertext-Preprocessor", time()+60, "/location", 1);
Here the setcookie function is being called with four arguments (setcookie has 1 more optional argument, not used here). In the above code, the first argument is the cookie name, the second argument is the cookie contents and the third argument is the time after which the cookie should expire in seconds (''time()'' returns current time in seconds, there time()+60 is one minute from now). The path, or location, element may be omitted, but it does allow you to easily set cookies for all pages within a directory, although using this is not generally recommended.
You should note that since cookies are sent with the HTTP headers the code has to be at the top of the page (Yes, even above the DOCTYPE declaration). Any other place will generate an error.
If a server has set a cookie on the user's computer, the user's browser sends it to the server each time a page loads. The name of each cookie sent by your server is stored in the superglobal array ''_COOKIE''. So in the above example the cookie would be retrieved by calling $_COOKIE['test']. To access data in the cookie we use ''explode()''http://php.net/explode/. explode() turns a string into an array with a certain delimiter present in the string. That is why we used those dashes(- hyphens) in the cookie contents.
So to retrieve and print out the full form of PHP from the cookie we use the code:
 $array = explode("-", $_COOKIE['test']); //retrieve contents of cookie  
 print("PHP stands for " . $array[0] . $array[1] . $array[2]); //display the content 
Note: $_COOKIE was Introduced in 4.1.0. In earlier versions, use $HTTP_COOKIE_VARS.
Cookies can be often used for:
You should never store unencrypted passwords in cookies as cookies can be easily read by other users. 
You should never store critical data in cookies as cookies can be easily removed or modified by other users.