Websites save cookies in your computer for the purpose of recognising your specific browser / computer combination, were you to return to the same site.
All cookies have an owner which tells you who the cookie belongs to. The owner is the domain specified in the cookie.
The word "party" refers to the domain as specified in cookie; the website that is placing the cookie. So, for example, if you visit www.helloeveryone.com and the domain of the cookie placed on your computer is www.helloeveryone.com, then this is a first-party cookie. If, however, you visit www.helloeveryone.com and the cookie placed on your computer says www.goodbye.com, then this is a third-party cookie.
Increasing numbers of people are either manually blocking third-party cookies, or deleting them reguarly. The cookies being deleted / blocked are third-party party cookies, as opposed to less problematic first-party cookies.
Why do far fewer people block first-party cookies? The reason for this is primarily that it is very difficult to surf the internet without accepting these cookies. First party cookies are necessary in order for you to be recognised as an individual. Any site that you login to as an individual requires a way of identifying you as "you". Hotmail, Yahoo, Gmail, online banking, ebay, Amazon, etc.
Additionally, anti-spyware software and privacy settings do not target first-party cookies.
How does this affect tracking systems, when people block / delete cookies?
A: All visits will still be recorded, but a person who has deleted the cookies will not be recognised as the same (returning) visitor.
When cookies are in place, and not blocked or deleted, total visitor counts will remain comparatively low. If a person constantly deletes cookies, they will be counted as a new "unique" visitor with every subsequent visit.
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