The Cloaking (CL) flag makes a player invisible on the 3D view. The player will still show up on the radar, however.
The Cloaking flag reduces the amount of information given to other players. This makes it more difficult to accurately aim at a cloaked tank. This can make it easier to get close to an enemy without them either noticing or being able to accurately shoot them. Seasoned players will keep an eye on radar and be able to take down a cloaked player.
Tread marks of a cloaked tank will still appear on the ground, and a cloaked tank that is shooting will also give a better indication of location. And as mentioned, the cloaked tank will still appear on radar, though some maps or servers do not have radar.
The Laser flag cannot kill a cloaked player. This can be used to take down someone camping with Laser. When a player with Laser is up against a cloaked player, the Laser flag should be dropped.