An Invisibility Cloak is a cloak of silvery grey material that, when worn, makes the covered parts of the wearer invisible. The weave is so fine that an Invisibility Cloak is "strange to the touch, like water woven into material". Invisibility Cloaks are woven from the hair of the Demiguise.

Harry's Invisibility Cloak is either quite large, big enough to cover several kids and a dragon in a wooden packing crate, or more likely it magically expands to cover what it needs to cover, within limits.

• Invisibility Cloaks are rare and valuable. Harry inherited one from James Potter, which was given to him anonymously by Dumbledore at Christmas of 1991.
  
  
• The fake Moody had an Invisibility Cloak in the seven-lock trunk (second key).
  
  
• The members of the Order of the Phoenix used invisibility cloaks to hide themselves as they stood guard over the Department of Mysteries.

(taken from HP Lexicon; thanks!!}