Hacking is when people alter a Wii Console/Animal Crossing Game in a way that Nintendo did not create them. Nintendo doesn't endorse hacking nor does The Animal Crossing Post.
There is the possibility that hacking may ruin your game system, but not always. Nintendo would not honor their warranty for a hacked game system. Some people feel that they bought, and own their game system so they can do whatever they want with it.
People who hack their Animal Crossing towns may create items that are not Nintendo created, or move items around in their town that are permanent fixtures. One of the first hacked item to show up in the game was the Dimentio Mask HDLC.(Hacked Down-Loadable Content)
One controversy over hacking items, is that it takes up Nintendo's legitimate DLC item slots that they have allotted. Some say there are 256 slots. DLC means Down-Loadable Content. These are items that Pete unexpectedly brings to your town throughout the year from Nintendo. There has been a lot of discussion on this subject. When you have a hacked item it takes up one of the spaces that Nintendo could eventually fill with DLC items. Conceivably you would not be able to get the items anymore if yours slots have been taken up by hacked items.
There is a lot of speculation about how this will play out in the end. It will take a while to fill up 256 slots. If you play online it is virtually unavoidable to get exposure to the hacked items. They shouldn't hurt your game though. They would just take up some slots. About the only way you could avoid them would be to only play with people you know outside of the game and everyone agrees to only play together within that group. Make sense?
Duping would be making a duplicate of an item. This is not done by hacking and does not hurt your game console. Cloning is the exact same thing, just different wording. It means making a clone of an item. It isn't written in by Nintendo to do this, but it is pretty harmless. It is just copying regular Nintendo Animal Crossing items.