Cholesterol is a wax-like steroid molecule that has a function in our metabolism - the processes in the body that turn the food we eat into energy we can use and/or muscle or fat.
Cholesterol exists in the membranes of our cells, and how much cholesterol is in different types of cells depends on the function of the particular cell.
Liver cells, for example contain approximately 30% cholesterol, probably because your liver is where all the cholesterol your body needs is manufactured.
In the membrane of a cell, cholesterol serves at least two primary functions:
1) it modulates the fluidity of the membrane, so that the membrane can function over a wide temperature range.
2) it prevents leakage of ions – which are used by a cell to interact with the other players (other cells, nutrients and more) in the body - by acting as a cellular insulator. You could say that cholesterol is a discriminator because it serves to allow cells to distinguish from and identify cells to one another. Those ions that cholesterol helps manage need to be in specific places at specific times. We're "positive". :)
This is all helps to explain why different levels of the two primary types of cholesterol we know of (HDL and LDL) are important.