Cheese
Dairy farms produce cheese. Production of cheese begins once you place a dairy farm on oasis grass. Once the worker arrives at the farm, he will sit and wait till three cows have been bred; once that has occured he will procede with milking them. He will then pour the milk into a bucket and wait for it to harden into cheese, which he will then take to the granary (three cheese wheels per trip).
Leather
Dairy farms' secondary use aside from food is leather production. Once you have placed a leather workshop, the skinner will procede to a dairy farm, take a cow back to her workshop, and kill it, then making it into leather armor (provided, of course, that you have a dairy farm and a cow). This cripples cheese production.
Other Uses
Cows can be catapulted (from either trebuchets or catapults) onto a certain point to cause disease. As well, cows can be shot at (and killed) with bows and crossbows and killed by footmen.