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Let's try the reverse - here is what cloaking isn't and not how it works:
it should be noted that the site author makes no claim that this is "cloaking", simply a way to hide your code, but I found the approach amusing.
Squish, on the other hand, compresses your html file into as few lines as possible. Although your code will be easily seen, the person trying to analyze it will have a headache because.... Well, why don't you just check out the source code of the squished version of this page to see what I mean.
I checked "squish" in the Concise Oxford Dictionary.
It gave the definition as "marmalade" so I presume that "squished" means marmalized - need I say more and don't forget to wash your hands when you have finished.