Cholesterol plays a crucial role in maintaining membrane fluidity and stability in cell membranes. It integrates into the phospholipid bilayer, preventing fatty acid chains from packing too closely together, which is vital for maintaining optimal membrane permeability. Additionally, cholesterol serves as a precursor for various steroid hormones and is essential for the formation of lipid rafts, which play a role in cell signaling and organization. By influencing fluidity and functionality, cholesterol is essential for the proper functioning of cells.