Cookies are tiny computer programmes that sit in a user's Web browser, recording data that can be read by the internet sites that deposited them on the user's PC. Their main purpose is to let sites know more about their visitors, ushering in what some have hailed as a new world of personalised marketing - maybe even one-to-one advertising.

Mr Danny Meadows-Klue, chief executive of the Interactive Advertising Bureau, a think-tank for the commercial digital industry, explains: "The internet, through cookies, offers the chance to create new types of personalisation, with ads geared to much more tightly focused groups of customers."

Advertising engines can "serve up" ads on to websites by analysing the cookies they have given their visitors - to someone who continually visits a supermarket site and buys nappies, they might serve up advertising from toy manufacturers.

But Ms Rebecca Jennings, analyst at Forrester Research, notes that the amount of personalisation advertisers can achieve online tends to be rather limited. "Cookies do not know who you are. They can identify you as a previous visitor and tell your behaviour during your visits to the site but unless you take part in a registration process where you divulge a lot of information about yourself, the cookies do not carry enough information to allow you to be targeted as an individual," she explains.

One-to-one marketing may be technically feasible, but in practice it remains as far off as ever, she says: "It would be too expensive to try to serve up advertising that is very tightly tied to the individual."

The most personalised digital advertising we are likely to receive comes in the form of emails with our names on them, containing content geared to our market segment based on our location, gender and past purchasing behaviour. This is hardly new: the same can be achieved by direct mail campaigns.

There are also privacy implications. Websites can easily collect information on their users, but the ways in which that information can be used are tightly regulated, particularly in Europe.

Cookie technology allows sites to track visitors not only as they surf the site to which the cookie belongs, but also to view their entire surfing behaviour.

However, while this technology exists, it is not in widespread use because of privacy considerations, says Ms Jennings. "People don't like the idea that you are tracking them. And you get into a bit of a legal minefield."

Certain technology that tracks people's surfing habits has been labelled "spyware" because it surreptitiously relays that information to shady internet sites. The more nefarious forms of this software can even track a user's keyboard usage in order to steal his or her password.

Yet many users remain ignorant of their privacy rights and what advertisers may be doing to their computers.