Matt Cutts, Google’s web spam spokesperson, has recorded a new, 8 minute video:

Google’s Definitive Cloaking Video
Cloaking is ANYTHING done to show Google a different view of a website, than it shows a visitor.
There are many ways of doing this. They are all “black hat” violations of Google’s guidelines. This is high-risk behavior that will get a site penalized or even banned.
Don’t do them. If someone promises you great rankings fast, and it involves cloaking, Just Say No.