So I see people that are cloaked and shooting all the time in servers, however I'm not sure if it's a hack or a glitch/bug. According to someone in a server I was playing in I was actually cloaked and shooting at the same time, but I'm no hacker and on my screen I was just playing normally.

It's a cheat that's being sold on a web site. The issue is that server side lag is rampant, and this makes the kill cam unreliable. However, anyone on the "team" of the permacloaker can follow them and watch. They never decloak. Ever.

Humorously though, if you start spamming nanovision and killing them thanks to their considerably weakened resistance in cloak, they (nearly) always leave because of it. I guess even with cheats they aren't willing to learn to play. But I digress.

There are a lot of topics on the subject, and many videos of it. I myself have posted a video containing at least three permacloakers. A lot of them will freely admit it, as if they're proud they payed money to cheat in a game.

Haha yeah I love how easy they make it to kill them because they have low health. Thanks for the info.

No problem. Hope it helps.
If you can, get some friends to squad so you always have a stacked team against them. This pretty much guarantees they leave. You don't pay for a cheat just to be stomped by people who are simply better than you. If you need squaddies(Yeah I know it's not a word. X-Com still has its claws in me after all these years) and have steam, check the group "Crysis 2 Ranked Players"*. The only cheaters we haven't been able to handedly beat are the aim botters. And, as I've posted before, that aimbot is impressive because it uses the game against itself. Those guys are a little frustrating, but when you have a squad of 6-8 players it's really really easy to simply leave them (and thus basically an empty server) and hop on a 'fresh' one.

For all the things I dislike about Crytek right now, I still give them credit because somehow they used a server side patch/whatever to wipe out a significant portion of the cheaters, even if it was only temporary. I've been in software for more years than I like to admit and I've never seen a server side 'fix' do that. Maybe they just systematically banned them, I don't know. Either way they're going to need to do it again here pretty soon.

Edit: * The steam group is for PC players of the game. I apologize to console players. I've been mistakenly posting information on the assumption I was talking to PC players only, which is incredibly rude to our console brothers and sisters. They have less of an issue since consoles are considerably more difficult to cheat in multiplayer on.