I read about some one who blocked Google from tracking his internet activity with cookies. How would you do that? How do you limit placement of cookies while still having handles and passwords saved?

Why would anyone save passwords and log on, in their computer ?

You can try blocking cookies from the browser settings (in Firefox: Options > Privacy) and then having username/password saved by the browser.

It's almost impossible to complete block your online activity from Google.
It's been tried by many people, but most fail mostly due the google's advertising.