The ability to hide yourself or someone supernaturaly from others. Leo was using this power to hide Daisy, a mortal woman, from her darklighter boyfriend Alec. He couldn't sense or even see her. Later on, cloaking was used by Gideon, when the Charmed Ones visited Magic School for the first time, to help save it. Also in season 8, Paige Matthews uses this ability on her charge Mikhele to protect her from a group of darklighters that were after, because she was to become a future whitelighter. However due to Billie's and Christy's plan to trap the sisters in their dreams, Mikhele ran out of the manor (un cloaked because paige was knocked out) right into the hands of the darklighters, killing her.
Though cloaking is a protective ability of powerful magical creatures, it is most commonly known as spells that witches use to cloak themselves from demons.