The cloaking of URLs only works on the blog itself. For example, your affiliate link for product "Valuable Product" may be http://yourID.merchant.hop.clickbank.net

When a visitor comes to your blog and hovers their cursor over the link, it will read something like:

http://your-blog.com/to/this-valuable-product-solves-problem-xyz

After the visitor reaches the merchant's site, it's up to the merchant whether they will redirect the visitor to something like merchant-site.com or merchant-site.com/yourID

The only way we could keep the link cloaked even on the merchant's side is if we used "frames" but those:

1) are prohibited by Clickbank

2) Internet Explorer is notorious for not letting some cookies pass through framed (so you could lose your commissions).

Hope this helps!