Cloaking is a feature that's been in Torque since Tribes 2. Setting a texture would cause a texture to overlay the shape of a model when the function to set it as cloaked made it transparent. However its existence has been almost completely ignored in Blockland, and like many features of Torque that have been ignored for a while tend to do, it's broken down. You can call setCloaked on your player, but all it does these days is forget up the rendering. Your player model won't be hidden, it'll just have all its parts drawn in the wrong order. The texture will be overlayed on the model, and will shift around at a speed proportional to your framerate. I used to use that for a cool teleport effect, but then the shadows and shaders update came out and anyone with shader settings on won't be able to see it moving at all. I can't think of anything worth doing with it anymore.
You can't cloak individual weapons when players hold them either. You have to cloak the whole player. There may be some hope of changing textures on mounted images through other means, but I'd have to dig through blockland alpha, as all I'm going on with this was a shield item held in the off-hand that I recall having multiple textures that could show on it.