It can store passwords and preferences, speeding up log on times when visiting a sight you've used before. This is an invasion of privacy. It can generate quite a bit of unwanted and unsolicited email from spam mailers. It also can generate email from special interest groups based on your web-surfing record as shown by your cookies. Also, if another user of your online account has visited some pornographic sites, for example, this can generate a slew of pornography related emails to you.
Some people are afraid of cookies because they think they can pass on viruses.
This is highly unlikely. Many browsers are now equipped with a feature for turning off cookies. You can either refuse all cookies, or be alerted whenever a cookie is sent, allowing you the option to refuse it. You can also find your cookie files on your hard drive and delete them. They are named cookies.txt.