Since this question is rather popular, I thought it useful to give it an update.
Let me emphasise the correct answer as given by AviD to
This is touching on two separate issues.
Firstly, session hijacking. This is where a third party discovers, say, an authenticated cookie and gains access to someone else's details.
Secondly, there is session data security. By this I mean that you store data in the cookie (such as the username). This is not a good idea. Any such data is fundamentally untrustworthy just like HTML form data is untrustworthy (irrespective of what Javascript validation and/or HTML length restrictions you use, if any) because a client is free to submit what they want.
You'll often find people (rightly) advocating sanitizing HTML form data but cookie data will be blindly accepted on face value. Big mistake. In fact, I never store any information in the cookie. I view it as a session key and that's all.
If you intend to store data in a cookie I strongly advise you to reconsider.
Encryption of this data does not make the information any more trustworth because symmetric encryption is susceptible to brute-force attack. Obviously AES-256 is better than, say, DES (heh) but 256-bits of security doesn't necessarily mean as much as you think it does.
For one thing, SALTs are typically generated according to an algorithm or are otherwise susceptible to attack.
For another, cookie data is a prime candidate for crib attacks. If it is known or suspected that a username is in the encrypted data will hey, there's your crib.
This brings us back to the first point: hijacking.
It should be pointed out that on shared-hosting environments in PHP (as one example) your session data is simply stored on the filesystem and is readable by anyone else on that same host although they don't necessarily know which site it is for. So never store plaintext passwords, credit card numbers, extensive personal details or anything that might otherwise be deemed as sensitive in session data in such environments without some form of encryption or, better yet, just storing a key in the session and storing the actual sensitive data in a database.
Note: the above is not unique to PHP.
But that's server side encryption.
Now you could argue that encrypting a session with some extra data will make it more secure from hijacking. A common example is the user's IP address. Problem is many people use the same PC/laptop at many different locations (eg Wifi hotspots, work, home). Also many environments will use a variety of IP addresses as the source address, particularly in corporate environments.
You might also use the user agent but that's guessable.
So really, as far as I can tell, there's no real reason to use cookie encryption at all. I never did think there was but in light of this question I went looking to be proven either right or wrong. I found a few threads about people suggesting ways to encrypt cookie data, transparently do it with Apache modules, and so on but these all seemed motivated by protecting data stored in a cookie (which imho you shouldn't do).
I've yet to see a security argument for encrypting a cookie that represents nothing more than a session key.
I will happily be proven wrong if someone can point out something to the contrary.