Local shared objects (LSOs), commonly called Flash cookies (due to their similarities with HTTP cookies), are pieces of data that websites which use Adobe Flash may store on a user's computer.[...]
As with HTTP cookies, local shared objects can be used by web sites to collect information on how people navigate those web sites even if people believe that they have restricted the data collection. Online banks, merchants, or advertisers may use local shared objects for tracking purposes.
On 10 August 2009, Wired magazine reported that more than half of the top websites used local shared objects to track users and store information about them but only four of them mentioned it in their privacy policy. "Flash cookies are relatively unknown to web users," it said, "even if a user thinks they have cleared their computer of tracking objects, they most likely have not." The article further asserts that some websites use Flash cookies as hidden backups, so that they can revive HTTP cookies when user deletes them.
According to New York Times, since July 2010, there had been at least five class-action lawsuits in the United States against media companies for using local shared objects. (Read more on wikipedia)