Cookies are small files stored on a user's computer that identify the user each time they visit a website. PHP allows you to create and retrieve cookie values. The setcookie() function is used to create a cookie by specifying a name, value, and expiration time. Cookie values are stored in the $_COOKIE superglobal array and can be accessed to retrieve the value. Cookies can be deleted by setting an expiration time in the past. If browsers do not support cookies, other methods like forms can be used to pass data between pages.