I believe this is a somewhat inaccurate and often misinterpreted statement.I assume that by "bad" people mean that it will (or may) cause health issues in your body. My mom always used to say: Beware of eggs, especially yolks, because they contain too much cholesterol. Here's what my investigation revealed.
Exhibit A. Cholesterol is an essential component of cell membranes for mammals (and, therefore, humans). It is an important precursor for the bionsynthesis of bile acids, steroid hormones (including androgen and estrogen) and some fat soluble vitamins. Bottom line: In itself and by itself cholesterol does not cause disease or malfunction in a normal body under normal metabolic conditions.
Exhibit B. Dietary cholesterol is only responsible for approximately 20% of all cholesterol circulating in human body. New cholesterol is produced by liver (and also recycled) every day in addition to the amount consumed with food to replace what was excreted from the body (which is about 1.2 g/day). So the body will produce about 2 g of cholesterol in addition to the daily amount of dietary cholesterol (0.4 g) every day. If the intake is higher on a specific day it simply means that the body will produce less cholesterol IN ADDITION to it. If the intake is less, it will produce more to keep the level fairly stable. Bottom line: the amount of cholesterol we consume with diet has little impact on cholesterol level in our blood.
Exhibit C. Now there appears to be a link between high level of cholesterol and progression of atherosclerosis. It is believed to be due to the fact that the fatty build-up that thickens arteries (which in turn causes narrowing of the artery and may lead to high blood pressure and other cardiovascular conditions) consists largely of cholesterol. It also appears that elevated cholesterol is not the "cause" but rather a result of a protective reaction of the body to a certain process (namely, when artery walls become damaged by LDL molecules that were oxidized by free radicals). Why it happens or, rather, what is the underlying cause for this abnormal elevation of cholesterol levels still seems to remain unclear.
Bottom line: elevated cholesterol is not the culprit; but rather a result of a body response to some other process. To use an analogy: a problem with a flat tire is that it does not contain enough air to keep the rims from hitting the road, although it's not the cause of the problem; therefore constantly adding air into the tire may provide a temporary relief but it is not going to resolve the issue because the leak is caused by a punctured tire.