The Cloak of Deception allows Wander to become completely invisible. While invisible the Colossi will not be able to attack Wander, but if he shoots at the colossi with his bow the colossi may realize where he is. It may be worth noting you can still see Wander's shadow with the cloak of deception on.
Unlike invisibility items in other games, The Cloak of Deception makes Wander completely invisible. The only thing the cloak does not hide is your shadow, which allows the player some idea of where Wander actually is.