Cholesterol is an important component of all cell membranes.  The above image shows cholesterol (yellow sacs) inside cell membrane denoted with purple arrows.   The cholesterol  is especially important for brain tissue which is 50% cholesterol by dry weight.

The following points about cholesterol were made in the British Medical Journal:

1) Autopsy studies of people dying of heart disease shows no correlation between cholesterol levels and heart disease.

2) High cholesterol is not a risk factor for women, elderly or diabetics.

3) Old people with high cholesterol live longer than old people with low cholesterol.

4) No dietary cholestrol lowering trial has ever succeeded in lowering mortality from heart disease, or from any cause.

5) Statin drug treatment lowers cholesterol levels, however, the small benefit of statin drugs is not due to cholesterol lowering, it is due to an anti-inflammatory effect of the drug.

This above information came from a letter to the editor published in the British Medical Journal (see below).

Reference: 

Hypercholesterolaemia, Should medical science ignore the past?  
by Uffe Ravnskov,  BMJ 2008;337:a1681,16 September 

For their article on hypercholesterolaemia and its management Bhatnagar et al selected reviews only if they included "extensive recent references,"1 thereby missing important knowledge from the past [full list of references in rapid response].2

Let me elaborate:

No association between cholesterol and degree of atherosclerosis has been found in postmortem studies of unselected individuals.

High cholesterol is not a risk factor for women, patients with renal failure, diabetic patients, or old people3

Old people with high cholesterol live longer than those with low cholesterol3

In cohorts of people with familial hypercholesterolaemia, cholesterol is not associated with the incidence or prevalence of cardiovascular disease, and their average life span is similar to other people’s.

No randomised, controlled, unifactorial, dietary, cholesterol lowering trial has ever succeeded in lowering coronary or total mortality4

No clinical or angiographic trial has found exposure-response between individual degree of cholesterol lowering and outcome3

More than 20 cohort studies found that patients with coronary heart disease ate the same amount of saturated fat as did healthy controls4

Seven of 10 cohort studies found that patients with stroke ate less saturated fat than did healthy controls

The concentration of short chain fatty acids in adipose tissue, the most reliable reflection of saturated fat intake, is similar or lower in patients with coronary heart disease compared with healthy individuals in five case-control studies

The effect of statin treatment is grossly overstated and is not due to cholesterol lowering.3 Only a small percentage gain benefit—and then only if they are men at high risk—and the benefit is easily outweighed by side effects that are more common and more serious than reported in the statin trials, if reported at all.5

References

1. Bhatnagar D, Soran H, Durrington PN. Hypercholesterolaemia and its management. BMJ 2008;337:a993. (21 August.)[Free Full Text]
2. Ravnskov U. Rapid response to: Hypercholesterolaemia and its management. bmj.com 2008. www.bmj.com/cgi/eletters/337/aug21_1/a993#201600
3. Ravnskov U. High cholesterol may protect against infections and atherosclerosis. Q J Med 2003;96:927-34.[ISI]
4. Ravnskov U. The questionable role of saturated and polyunsaturated fatty acids in cardiovascular disease. J Clin Epidemiol 1998;51:443-60.[CrossRef][ISI][Medline]
5. Ravnskov U, Rosch PJ, Sutter MC, Houston MC. Should we lower cholesterol as much as possible? BMJ 2006;332:1330-2.[Free Full Text]