You can use cloaking as a performance optimization when you want to prevent a part of the source control tree from being retrieved. The following are typical scenarios for using cloaking:
• You want to build the project locally and a folder is not needed for the build, for example a documentation folder.
• You are part of a large team project and you only want to retrieve part of the project.
For either of the above scenarios you can cloak folders to stop the client retrieving those folders. You cloak folders on the client by editing the workspace and changing the status of the working folder from active to cloak.
• Do not cloak individual files. This is likely lead to maintenance problems later in the project.
• For a large project, map out the root folder and cloak sub folders rather than creating multiple workspaces for the project.
Source: - TFSGuide