(Developer's note: the functionality of 'cloaking' devices has long been scheduled for a painfully large RetCon. They will, at some point, no longer function remotely as they have in the 0.4.x versions of Vega Strike. A description of their functionality in said versions of Vega Strike follows)
The cloaking device is the ultimate in stealth technology. It makes the ship virtually invisible to optic, radar, or other sensor scans. There are, however, a few "downsides" to the device: 1) It uses a great deal of power, and may drain your *** within a very few minutes; 2) While the enemy can't see you, neither can you lock on to or fire weapons against enemies when your cloaking device is engaged; 3) When the device is engaged, you lose your screen protection; 4) It also makes it difficult for hired wingmen to locate and form with you.
Although the device is highly effective against optical and sensor detection, enemy ships sometimes will detect other indications of the presence of cloaked ships. For example, a cloaked ship passing through a warp gate may be itself invisible, but the gate will still show that it's been activated. Enemy ships waiting around a gate for arriving targets may use this to help them track and attack cloaked ships.
Despite the few disadvantages, a cloaking device is almost indispensable for pilots who will have to fight capships or large squadrons of enemies. They are expensive, but they are well worth it.