Link Cloaking is a method to convert your long and ugly looking affiliate links to short and pretty links.

Cloaking is a black hat SEO technique in which the content presented to the search engine spider is different from that presented to the user's browser. This is done by delivering content based on the IP addresses or the User-Agent HTTP header of the user requesting the page.

Cloaking is a SEO (Search Engine Optimization) technique. Basically it's about presenting the crawler of search engines a different website than normal users. Clocking is showing the search engine one thing and your visitors another. This method is treated as spam and is not recommended to use.