Can somone explain to me exactly why cloaking affiliate links is important?

You are not hiding the fact that you are linking to another site what you are doing is preventing or in fact discouraging others from stealing your commision.

For instance a classic example out there is soemone sending a link for a Clickbank product. You follow that link but do not buy that product. You then find them product in Clickbank, post a review on your blog with a link and then you purchase with a differennt email addy through your affiliate link, thus you have stolen that first person's commision.
In practise I really think that this happens more in IM than in any other niche.

So can a service like bit.ly protect me from that?

NEVER use someone else's domain for your redirect - they can make a change (although that's probably rare) but they can also go away.

I'm still looking for someone who has done TESTING to really see that they made more money by hiding.

I always recommend redirects on one's own domain for aff links.

I show how to do in my free report at CBSaleTracker:

How To Add Affiliate Links To Your Articles And Lenses
- Protect your commission and stay on EzineArticles good side!-


Regards,
PCRoger.

there is also the problem of blacklisting...

On a new product launch a lot of emails going out with a link to a new domain can and do cause sites to be blacklisted.

On big launches the owners will ask that super affiliates especially to use their own cloaked link to avoid new site syndrome.

And cloaked is a bad term really it sounds clandestine, its really just a redirect

I usually use my blog url www.robertpuddy.com to construct the link

Using stuff like bitly etc will probably result in less click throughs and bad conversions

Plus (and this is a real biggie) if you control the redirect if an affiliate site does go down you can change the redirect to another page and wont lose the traffic.

There are a host of ways to do it, you can use a simple php redirect page or something like
http://hotbobs.phantomv2.hop.clickbank.net (direct affiliate link)

cloaked link http://mybestbonusoffer.com/phantom

The second link uses the product you will find there

with the first link its obviously an affiliate link but the second one is more personal to me and will get better click throughs from my list

Now just add tracking

Roger.

The big worry usually mentioned is that affiliates will find the product through your offer, but will substitute their own affiliate link to get to the offer.

Personally I think that might happen about once in a billion times. If I am interested in anything and am a CB affiliate, I do know how to search the CB market place. My chances of just finding it on the web are really about less than a billion to 1.

I started doing a little with php for example, and totally by accident, while searching other things, I found php instruction products on the CB market place.

Beyond using the CB encrypted links, I don't bother cloaking. The exception is with affiliate links in articles. They are usually not permitted, so I do a redirect from my site.