Google does want you to cloak your data, but only certian data. Here is an example
Load up the following url
http://www.dvdera.com/newdvds.phtml?action=listall into your browser. Move the mouse over any of the DVD's and take note of the actual URL addresses.
Then visit this url
http://www.dvdera.com/newdvds.phtml?...ll&google=true and move the mouse over the DVD links... You see the difference?
Google actually likes this type of cloaking, if you were cloaking one thing and showing something completely different to the surfer then you would get bitchslaped by them.
If you do cloak or play the SE games just remember not to draw too much attention to yourself.