What encryption algorithm is best for encrypting cookies?

Question

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

Answer 1

While both a very strong ones, AES is a standard.

As for security of small chunks of data: the smaller - the better. The less encrypted data is exposed, the longer you can use the key. There is always a theoretical limit of how much data can be encrypted within one key of given algorithm without exposing system to risks.