Hello Ryan,
It is a good question. Page Cloaking is also known as “Code Swapping”. You will see that half of the technique used by search engine is hidden in your explanation. But we will look at it in details. There are three ways, by which search engine can detect to see if you have used cloaking.
1. User-Agent cloaking
2. IP based cloaking and
3. A Human Representative.
1. User-Agent cloaking: If someone has used this type of cloaking then search engine sends a spider to a site without reporting the name of the search engine in user agent variable. If search engine finds dissimilar pages – the one that is accessed by a spider which reports search engine name and the spider which doesn’t report, then it is likely to be considering as a page cloaking.
2. IP based cloaking: A spider can be sent by the search engine via other IP address instead of those IPs used earlier by a spider. It is obvious that this new IP used by a spider will not be there in the database used for code swapping or cloaking. If the page delivered to a spider of known IP address (old spider) is detected different than the page delivered to the spider with new IP address (new spider), then search engine knows that the page cloaking has been used by a site.
3. Human Representative: assigned by search engine may visit a site to find out if the site has used cloaking. If he finds that the page delivered to a search engine spider is totally different than the page he has viewed, then he identifies that the site has used cloaking.
Now about the penalties we will cover it in next post… until then you may want to see the link given below, which will provide some additional information on “what is page cloaking”?
http://blog.eukhost.com/2006/03/30/page-cloaking