A small file downloaded to your computer when you browse a webpage. The main purpose of cookies is to identify users and possibly prepare customised webpages for them. Websites use cookies for several different reasons: to collect demographic information about who is visiting the website; to personalise the user’s experience on the website; and to monitor advertisements. Any personal information that you give to a website, including credit card information, will most likely be stored in a cookie unless you have turned off the cookie feature in your browser.

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Source: Barron’s Business Dictionary on Answers.com and APC ICT Policy Handbook