Google webmaster guidelines > Quality guidelines - Basic Principles > Principle one of four in this category states...
"Make pages for users, not for search engines. Don't deceive your users or present different content to search engines than you display to users, which is commonly referred to as "cloaking." "
Definitions-
users - the people who visit and use your website.
cloaking - creating a web page that shows users one thing and a search engine another.
Examples and Explanations
Making pages for users not search engines.
Webmasters will do anything they can do to increase the rankings of their website. Seems natural doesn't it? Everyone wants more visitors from and better ranking in Google.
Often the actions a webmaster takes to do this are deceptive. While some of these actions work for a short time most will do more harm than good to your website and it's ranking in Google. Cloaking is one such action.
This guideline gives very good insight on how to create a quality web page and a responsible web presence. In fact, if you take the first sentence if this guideline to heart, many decisions that you have to make while building or while marketing your website become more clear.
Make pages for users, not for search engines.
When making decisions about your website it is always important to think "How will this affect my users?". If you are making decision about your website thinking "How will this affect search engines?" then you may be concentrating on the wrong thing.
Many people roll their eyes when then hear Google advising them to "Make pages for users, not search engines". It seems a bit unrealistic that you can actually follow this advice since after all, you are making a webpage to be seen in search engines. But before you roll your eyes too much let's see what they mean by this.
A decision made for search engines instead of users
Okay let's say you have made a great article and it is on your site.
You receive some traffic, but you want more.
You begin thinking "Hey, I have heard that search engines like websites that have lots of pages. I have a great idea! I am going to take my article and split it up into three pages, then the search engines will like me better".
Okay now you have three pages instead of one. It is less convenient for your users, and you most probably are getting less traffic than you were before from search engines. This is often the result of such experiments, you are less useful to your visitors and you get less traffic.
The only reason you split those pages apart was because you wanted search engines to like you more. You did not follow this guideline.
Here is what you have done for users and search engines....
For Users - You have created unnecessary steps for your visitor to take because they now have to click "next page" just to get their information. This makes your page less enjoyable and less useful. Result? Less people will like your site or return to your site.
For Search Engines - You have diluted the content on your page. This makes each individual page have less useful content. Result? When someone searches for the topic of that article the search engines will no longer show your site because it has lost it's value. Instead of having one page that was doing okay in search engines, you now have three pages that are doing bad.
The dangerous part
What to do when you get to the dangerous part
This is when the "make pages for users not search engines" comes in. You have a web page and want more traffic. What do you do next? Many of the decisions you make at this point will affect the direction and quite possibly the success or failure of you website. The best thing to do right now is to think not act. For those of you reading this page right now you are doing what you should be doing. Researching. Understanding what affects your ranking in search engines allows you to make better decisions. The things that affect your ranking in Google are...
1) The content of your website
2) Who is linking to your site
3) How well you are adhering to the Google webmaster guidelines
None of the above things is "users" which might seem odd if we are supposed to make pages "for users, not search engines" but the reality is that the first two are a measure of how much users like your site, or how much users are likely to enjoy your site, and the third recommends that you make pages for users.
It is really about users.
Google wants to give users the best choice of websites it possibly can, the ones that are most likely to be relevant to their search query.
The absolute best strategy to increase your rankings in Google is to be the best, most useful and most relevant site about the subject of your key words.
The absolute worse strategy to increase your rankings in Google is to try to manipulate Google.
The above is true if you are a business seeking to have a responsible web presence. In other words if you are a store or a hotel or want to have a respectable name for your venture. I would be lying to you if I said that people aren't making money manipulating Google. The people who are manipulating Google will not have a lasting web presence but many enjoy short term profit.
The goal of my website is to explain the Google webmaster guidelines and offer advice about how to follow them. The people who will profit most from following these guidelines are the people who are making a web presence that they want to last long time.
Cloaking
Cloaking is actually defined right within this guideline
Don't deceive your users or present different content to search engines than you display to users, which is commonly referred to as "cloaking."
This guideline does not affect you unless you are currently using this technique. If you do not know what cloaking is, you are probably not doing it.
Key concepts
Make your web pages for the people who are visiting your website, don't make decisions solely based on search engines.
Your visitors and search engine crawlers should see the exact same thing. If search engine crawlers see something different than your users do, you are engaging in cloaking which can result in your site being removed from the Google index.
Resources
From Google:
Why are sites blocked from the Google index?
From other sources: