Here is a post I made on another forum...
Cloaking your affiliate link prevents commission theft from happening. Most affiliate links show the merchant name and your affiliate id. If a user replaces your affiliate id with their own id, you lose credit for the sale. When you cloak your affiliate link, it will not be that direct and your visitors will not be able to change the link easily.
There are also many people who recognize these ID's and don't like the idea of someone else making money from their purchase. They simply highlight the link, without your ID, and go to the site, thus costing you a commission.
Quality free cloaking tools are readily available, and more than adequate. I would not recommend spending any money on this.
Here are the three I use. They are all web based, and free...
TinyURL. Easy to use, save as a bookmark, or add to your toolbar in FireFox and IE.
I usually use this to shorten long URL's, rather than cloak affiliate links. TinyURL will ocassionally flag an affiliate URL as spam and reject it.
ViralURL is my favorite, and the one I use most.
Not only do you get a great cloaking tool, you are part of a built in ad program from which you can earn money.
Every URL cloaked is saved in your account and none are rejected. All the cloaked links in your account are automatically tracked, so you can view the click stats at any time. It shows daily, monthly, and yearly stats, along with the last 10 locations that link was clicked on.
Another great feature is URL customization (as long as you have a Domain name and host). Here is an example:
I will use my Trek Pay account. Please do not sign up under me, this is not the intent.
My affiliate code for Trek is -->
http://www.trekpay.com/?ref=3115 which looks like this cloaked -->
http://vurl.bz/comtac/Trek which can look like this should I want to change it -->
http://computertactics.com/recommends/Trek
This no longer looks like a disguised URL, it has my website address, and sort of makes sense to the user, yet it leads to the same place. A much more professional presentation.
The instructions to do this are at ViralURL. If you need further help with it PM me.
As far as the advertising goes, there is a small bar that runs across your landing page. You choose to either have it on the top, or bottom. I place mine at the bottom. Click one of my cloaked links and see what it looks like.
Finally, there is "ihid.us" which is part of the free network service Orange. It is only available to members, which again is free.
There is no advertising in the cloak, but there is also no customization. The idea is to make people aware of "ihid.us" and join the network, which there are many reasons to do anyhow.
As with ViralURL, stats and tracking are included.
One plus to note is there is an automated Twitter submitter called "Tweet Posts" which is part of the program. You can set up a multitude of Tweets with cloaked URL's and schedule them to automatically be submitted any number of times per day and days per week.