Many ad companies use this to collect some trivial information about you. Basically, they store what kind of stuff you do on certain sites and use this information accordingly. A good example of this is Amazon.com. They store what kind of books you look at and recommend other books accordingly. Many people are terribly offended by this behavior and insist that it's a violation of their privacy, etc. etc. In fact, entire books have been written on the subject. I've skimmed through a couple of them and I simply don't understand how worked up some people can get over these things.
Anyways, if you are a privacy freak and the fact that Amazon.com locally stores what books you've looked at and stuff, you can turn off cookies in your browser preferences (the exact method depends on what browser you use, but it should be pretty straight forward, regardless.) Be warned that many, many sites won't work properly without cookies enabled, though.
You also might want to go through your cookies and weed out ones saved at porn sites, if you're sensitive about that sort of thing. Not that the cookies themselves are harmful... But many people might not want sites with URL's like "www.hotbarnyardaction.com" to show up in their list of cookies