I've been asked this question several times and want to take a moment to explain how the cholesterol found in foods relates to your blood cholesterol levels. The label given to LDL cholesterol of "bad" and HDL "good" cholesterol tends to be confusing when it comes to dietary cholesterol found in foods.
Cholesterol is found in animal products, such as cheese, steak, and eggs. You will not find cholesterol from plant sources. The cholesterol in foods is simply "dietary cholesterol". It is neither "good" nor "bad". When you consume a food containing cholesterol the different components of the food are processed by the body. The liver packages the dietary cholesterol into low density lipoprotein (LDL) cholesterol and high density lipoprotein (HDL) cholesterol. This is where the labels "good" and "bad" come into play. (FYI - There are other packages, such as very low density lipoprotein (VLDL) cholesterol, but for simplicity we'll stick with LDL and HDL.)
"Good" and "Bad" Cholesterol
LDL cholesterols potential for oxidation which leads to the development of arterial plaque has given it the rap of being "bad". While HDL cholesterol contains more protein and tends to pick up cholesterol dropped throughout your arteries and returns it to the liver giving it the role of being "good".
However, I think it's very important for you to realize that there are "good" and "bad" forms of LDL cholesterol and "good" and "bad" forms of HDL cholesterol. It depends on their particle size and density. A standard cholesterol test does not measure the different particle sizes. If you are considering medication to treat elevated cholesterol levels I encourage you to discuss a comprehensive lipid panel with your physician. This will give you insight into your particle sizes to fully see what is healthy and what is not and you along with your doctor will be able to better determine the appropriate treatment plan for you.
Dietary Cholesterol Guidelines
Now, it we skip back up to my comments about the dietary cholesterol found in foods. Yes, dietary cholesterol does play a role in your blood cholesterol levels; however, saturated fat has a greater impact.
The American Heart Association recommends dietary cholesterol be limited to less than 300 mg/day. If you are at increased risk for heart disease you want to restrict your dietary cholesterol intake further to 200 mg/day.
Currently the American Heart Association recommends limiting saturated fat to less than 7% your total daily calories. This is an area currently under some debate due to recent study findings questioning the link between saturated fat and LDL cholesterol. However, these studies argue that there is little evidence to support a diet restricting saturated fat below 9% of your total daily calories. In my opinion based on findings to date, the debate is somewhat trying to split hairs and the bottom line is you can include some saturated fat, but let the majority of your fat calories be from heart healthy sources.