A cookie is a message that a web server will pass to a web browser when you visit websites. Your browser will store each of these messages in a file.
A cookie is used to track a user's website activity. When you visit some websites the server will pass you a cookie that is used as an ID card. When you revisit the website your browser will pass this cookie back to the server, this will allow the webserver to gather information on what pages you visit the most and ones you are likely to revisit.
If your site is on the UK server, you automatically have a cookies policy on your site, at www.yourdomainname.co.uk/cookie-policy/.