In the SEO World, people cloak for a few reasons:

(1) To serve search spiders different content then the users
- To rank better
- To save bandwidth
- To block bad spiders
- To spam
- etc.

(2) To direct users based on IP to the most geo-specific page possible
- Google does it also, if you come to Google.com in Israel, you will get the Google Israel search engine.

(3) There are more reasons...

But here I found an interesting and upsetting use of cloaking. Caitlyn Martin at O'Reilly Linux DevCenter Blog wrote that Iranian President Mahmoud Ahmadenijad new blog detects if your IP address is from an Israeli geo-location, and if it matches, then it will send you a "virus or trojan (reports vary) designed to exploit an Internet Explorer vulnerability."

More details at Yael K's blog, an American-Israeli and YNetNews.