Tracking cookies that record private information are the ones that most people tend to want to block. Choose and customize browsers to block the risky cookies and allow the ones that make browser use more efficient. White lists can be used to specify sites to accept desired cookies for IE versions and Firefox.

This is a different approach to cookie control and is not for the inexperienced user. For those willing to go through the process, this is a good method to gain control over cookies.
The start of this process is to whitelist sites. Starting with Internet Explorer, click Tools > Internet Options > Privacy > Sites. You then get the Per Site Privacy Actions menu:

Here begins manual entry of each site that you want to whitelist . You can toggle the settings for first and third-party cookies to make this easier, but you will lose customized specifications. To toggle the cookie settings, click Tools > Internet Options > Privacy. Select Settings and click OK.

IE doesn’t offer many options. Consider taking the time to manually whitelist and save some future troubles.
By specifying the sites to allow on the whitelist, you bypass the pre-set options that will certainly allow cookies that are undesired. Advanced Privacy Settings for IE8 and IE9 are limited and you lose accurate control by taking a shortcut.

Firefox offers better options. For those who do not wish to use Firefox, just stick to manual whitelisting with Internet Explorer. The overrides are limited at best. Give Firefox a shot and see what you can do. If it is not what you want, uninstall and leave it alone. Many people find IE a great browser, but some users might find Firefox more adaptable, faster and more user friendly.

Moving on to Firefox, you can find broad user options that allow for a clean customization.

Open Firefox and click on Tools > Options > Privacy. In the Privacy menu, find the “Firefox will…” option:

As seen here, uncheck “Accept third-party cookies and toggle the “Keep until” option to “ask me every time.” This option is beautifully streamlined compared to Internet Explorer. All you need to do from this time forward is work with the prompts when first-party cookies are attempted. Normally, these would be automatically set in the browser cache. With the above settings, you are prompted to allow or block the cookies. It might take a few days to customize or allow and block settings for given cookies, but Firefox remembers and continues to offer prompts when new first-party cookie attempt to present themselves. Visit the sites used most often and weed through the cookies. Thereafter, you are in complete control.

Whether using Internet Explorer or Firefox, cookie customization is a useful tool. In the end, it spares hassles and gives customized browsing without the annoyance of tracking cookies that can steal private data. Or you could manually clear your cookies each day, but that still allows time for sensitive data to be extrapolated. And besides, who remembers to do that on a daily basis.

Firefox users who do not want to work with prompts can check out the guide Configure Firefox To Delete All Cookies On Exit But Select Ones to work around that by deleting all but selected cookies on browser exit automatically.

The big question is how you can make sure that cookies are excepted for identification purposes and not accepted when you do not login into a website. The answer is a cookie manager that works on a per site basis. I need cookies for my blogs for instance and sites like eBay or Amazon but do not need them on sites where I do not login, say Google Search or other blogs that I do not administrate but only visit as a reader.

CS Lite is definitely one of the best Firefox Cookie Managers. The most effective way to manage cookies on your system is in my opinion to block them globally and enable them on a per-site basis. Blocking them globally ensures that no cookies will be set unless you explicitly allow them to be set. A good rule of thumb is to visit a website and if you do not recognize any problems you can keep the cookies blocked.

The first thing that I did after installation of CS Lite was to enable the global blocking of cookies in the options. The extension adds a icon to the Firefox statusbar that can be used to allow cookies for a specific site you are currently on. I did use this option to enable cookies for the sites that I visited throughout the day and that needed cookies to function properly.

I would like to point out two interesting features of the extension. The first is a blocklist that can be downloaded from the Internet. This blocklist contains more than 200 companies that set cookies to track users. This blocklist is accessible in a table that also contains the allowed domains. Downloading the blocklist makes only sense if you do not disallow cookies globally.

If you run a website and use some of those advertisement companies you should make sure to enable cookies for those services.

Update: The author has pulled the add-on from the Mozilla add-on repository. Check out how to selectively block cookies here.