You cloak when you need more traffic to an offer.
I am not talking about link cloaking here using bit.ly or a private service. I am talking about traditional black hat cloaking via IP, UA, geoIP, and other methods.
With organics, cloaking lets you take long tail phrases that are easier to rank for and get the traffic direct to offer. It also lets you take a more aggressive stance in how you lay your pages out compared to how to the search engines see them.
With paid traffic, cloaking can let you violate the TOS of the ad platform.
There is ALWAYS a risk for being caught. One thing to understand is that this is something typically done on a large scale. The average internet marketer doesn't need to cloak and likewise isn't willing to deal with the risk. It is a constant cat and mouse game. Cloaking was a major part of the whole acai flog site strategy from a few years ago. The ad platforms eventually caught on and limited some options, the FTC stepped in, etc. So things always change.
Can you use wpCloaker with Adwords? yes. Do I tell the average internet marketer to do this? Nope. It is too risky for them. If you want to do it you have to be willing to lose accounts. There are a few ways around the manual reviewers, some are really effective. But there is always risk. The bottom line with paid traffic these days is that the bots are easy. We work around them pretty quickly. The recent interest in cloaking pinterest is a good example. Last couple of years it was Facebook. Bots are simple. Do I have customers cloaking adwords? Yep. Probably 20-25% are doing it or tell me they are.