Many websites use this technique to gain more page rank. This technique will lead SE spiders to a specific file which is well customized in accordance with SE criteria. Often, SEs don't prefer dynamic content pages, especially those with unfriendly URLs (ex. index.php?catid=104&procatid=114&menu=4 ), to static content pages. Cloaking will identify the IPs of those SEs and lead them to another specific page before they scrawl our badly organized pages.

If any body knows or uses this technique, please share me some of your experience

Can't say much about cloaking - but you might want to take a look at a couple of other posts, which contain in-depth discussions on the crawl methodology of search spiders and what they actually look for in a page. Here are the links:

1. http://www.astahost.com/index.php?showtopic=2782&hl=
2. http://www.astahost.com/index.php?showtopic=2796&hl=
3. http://www.astahost.com/index.php?showtopic=186&hl=
4. http://www.astahost.com/index.php?showtopic=2427&hl=

The search engines actually frowns on such search engine cloaking. They see it as you trying to trick users of their search engines into pages that appear to be very relevant to their search as seen by the robots but they actually aren't. If you're not careful and the search engines detect your cloaking attempts, they can ban your site from their indexes.

Here some information about cloaking:

Cloaking: Also known as stealth, a technique used by some Web sites to deliver one page to a search engine for indexing while serving an entirely different page to everyone else. The search engine thinks it is selecting a prime match to its request based on the meta tags that the site administrator has input. However, the search result is misleading because the meta tags do not correspond to what actually exists on the page. Some search engines ... even ban cloaked Web sites.

I've heard about cloaking before, but I've never really known what it is until now. But I'm still confused after looking at the posts microscopic^earthling recomended, I'm not really sure how to go about effectively and safely using it without getting classified as spam by a search engine like Google, can anyone elaborate on this technique?

Cloaking is a technique that is banned by the search engine. I don't think there's any way to cheat withouth being caught with Google or Yahoo!. Just focus on buidling your site up and attract more visitors.