Cookies are stored on the user's hard drive (although during actual communication it is stored in your browser's memory). The directory is different for each platform.
Long-term
A Web site may set a 'long-term' cookie by choosing a future expiration date, generally one year from today. This cookie recognizes you when you enter the website and allows you certain features without having to log in.
Short-term
A 'short-term' cookie specifies a date in the past, and is deleted when you close your browser. This would require you to log in each time you visit the site to use certain enhanced features. The cookie remembers you as you surf through the site
Your account allows you to choose to have the long-term cookie disabled. This is recommend if the primary place you access the internet is on a public computer, such as a library or Internet Cafe.

Cookies are nothing but the Temporary Internet Files.
 
You can see the location in the Tools --> Internet Options --> General Tab --> Browsing History --> Settings -- > There you can see the current location of the Temporary Internet files.
 
You can also modify it to any location you prefer.