So can I use this like as if I have a shadow clone friend always with me or is that not what's going on here?

Doesn't work like that. It would appear as if your were standing just beside where you are actually standing. As if you were invisible and an illusion of you is beside you. But you would not have the benefits of being invisible. 

How does this work in regards to grapple checks? I understand it's not an attack but if the enemy is attempting to grapple the illusion of you, I'd assume it would still affect the ability check .

“When you want to grab a creature or wrestle with it, you can use the Attack action to make a special melee attack, a grapple.” -PHB

Grapples are just a melee attack that use Strength (Athletics) instead of weapon proficiencies, so they are affected by this item.

https://www.dndbeyond.com/sources/phb/combat#MakinganAttack

That makes sense. Thanks! 

I'm assuming that since it doesn't mention it, then it wouldn't apply, but similar things (like the blur spell) states that if a creature doesn't use it's eyes to detect (like with truesight or blindsense) would negate the disadvantage.

Quote from Noxx89 >>

I'm assuming that since it doesn't mention it, then it wouldn't apply, but similar things (like the blur spell) states that if a creature doesn't use it's eyes to detect (like with truesight or blindsense) would negate the disadvantage.

 Since the description of the magic cloak explicitly states that it projects an illusion I would rule that creatures with blindsight would bypass the cloak and attack like normal, but RAW would mean that blindsight creatures attack with disadvantage. 

Can someone clarify how this would pair with Mirror Image?

Would the mirror images also have the same effect? Or is using Mirror Image while wearing this kind of pointless?

Use Mirror Image rules first.  Roll a d20 to see if an image or character is hit. If the attack hits a mirror image (AC 10+dex bonus), it disappears. [The mirror images does not gain the benefit of spells or magic items, such as a haste potion/spell or Shield spell which are both bonuses to AC and not to your dex bonus]  If an attack hits the Cloaked User, the attacker has to roll a 2nd d20 and take the lower of the 2 rolls as if disadvantage was in place.  If the attack misses the cloak wearer, then you don't take any damage.  If the attack hits the cloak wearer, she then has to make a concentration roll AND the cloak stops working until the start of your next turn.

Quote from Cortower >>

“When you want to grab a creature or wrestle with it, you can use the Attack action to make a special melee attack, a grapple.” -PHB

Grapples are just a melee attack that use Strength (Athletics) instead of weapon proficiencies, so they are affected by this item.

https://www.dndbeyond.com/sources/phb/combat#MakinganAttack

 
Actually, in the next paragraph it says (bold emphasis mine):
"Using at least one free hand, you try to seize the target by making a grapple check instead of an attack roll: a Strength (Athletics) check contested by the target's Strength (Athletics) or Dexterity (Acrobatics) check (the target chooses the ability to use). You succeed automatically if the target is incapacitated."

In the cloaks' description, it says (again, bold emphasis mine):
"While you wear this cloak, it projects an illusion that makes you appear to be standing in a place near your actual location, causing any creature to have disadvantage on attack rolls against you. "

So no, this wouldn't protect against grapples.

Quote from CoryHunt >>

Quote from Cortower >>

“When you want to grab a creature or wrestle with it, you can use the Attack action to make a special melee attack, a grapple.” -PHB

Grapples are just a melee attack that use Strength (Athletics) instead of weapon proficiencies, so they are affected by this item.

https://www.dndbeyond.com/sources/phb/combat#MakinganAttack

 
Actually, in the next paragraph it says (bold emphasis mine):
"Using at least one free hand, you try to seize the target by making a grapple check instead of an attack roll: a Strength (Athletics) check contested by the target's Strength (Athletics) or Dexterity (Acrobatics) check (the target chooses the ability to use). You succeed automatically if the target is incapacitated."

In the cloaks' description, it says (again, bold emphasis mine):
"While you wear this cloak, it projects an illusion that makes you appear to be standing in a place near your actual location, causing any creature to have disadvantage on attack rolls against you. "

So no, this wouldn't protect against grapples.

 It would.It states it is an attack ,but instead of using To hit you use your STR(athletics) check ,but it is still saying it is an attack. That is like saying attempting a grapple gives you true sight and wouldn't get disadvantage in darkness as its not an attack roll.  Also it says a Dm can give Advantage and disadvantage where appropriate. Thus it would be appropriate to say when they first try they have disadvantage. 

Quote from kelfion >>

Quote from CoryHunt >>

Quote from Cortower >>

“When you want to grab a creature or wrestle with it, you can use the Attack action to make a special melee attack, a grapple.” -PHB

Grapples are just a melee attack that use Strength (Athletics) instead of weapon proficiencies, so they are affected by this item.

https://www.dndbeyond.com/sources/phb/combat#MakinganAttack

 
Actually, in the next paragraph it says (bold emphasis mine):
"Using at least one free hand, you try to seize the target by making a grapple check instead of an attack roll: a Strength (Athletics) check contested by the target's Strength (Athletics) or Dexterity (Acrobatics) check (the target chooses the ability to use). You succeed automatically if the target is incapacitated."

In the cloaks' description, it says (again, bold emphasis mine):
"While you wear this cloak, it projects an illusion that makes you appear to be standing in a place near your actual location, causing any creature to have disadvantage on attack rolls against you. "

So no, this wouldn't protect against grapples.

 It would.It states it is an attack ,but instead of using To hit you use your STR(athletics) check ,but it is still saying it is an attack. That is like saying attempting a grapple gives you true sight and wouldn't get disadvantage in darkness as its not an attack roll.  Also it says a Dm can give Advantage and disadvantage where appropriate. Thus it would be appropriate to say when they first try they have disadvantage. 

 The key phrase you're missing here is that the cloak gives disadvantage on "attack rolls." Making an attack is not the same as making an attack roll. A grapple is an attack, but you're making an "ability check", NOT an "attack roll". Therefore, the cloak does not, per RAW, give disadvantage on the ability check associated with a grapple attempt.

Of course the DM can rule that it does, but a DM can rule literally anything, regardless of whether it agrees with the written rules, so that's hardly relevant.

no it when you are BEING grappled that it no longer works. the attack roll still has disadvantage.

Quote from kelfion >>

Quote from CoryHunt >>

Quote from Cortower >>

“When you want to grab a creature or wrestle with it, you can use the Attack action to make a special melee attack, a grapple.” -PHB

Grapples are just a melee attack that use Strength (Athletics) instead of weapon proficiencies, so they are affected by this item.

https://www.dndbeyond.com/sources/phb/combat#MakinganAttack

 
Actually, in the next paragraph it says (bold emphasis mine):
"Using at least one free hand, you try to seize the target by making a grapple check instead of an attack roll: a Strength (Athletics) check contested by the target's Strength (Athletics) or Dexterity (Acrobatics) check (the target chooses the ability to use). You succeed automatically if the target is incapacitated."

In the cloaks' description, it says (again, bold emphasis mine):
"While you wear this cloak, it projects an illusion that makes you appear to be standing in a place near your actual location, causing any creature to have disadvantage on attack rolls against you. "

So no, this wouldn't protect against grapples.

 It would.It states it is an attack ,but instead of using To hit you use your STR(athletics) check ,but it is still saying it is an attack. That is like saying attempting a grapple gives you true sight and wouldn't get disadvantage in darkness as its not an attack roll.  Also it says a Dm can give Advantage and disadvantage where appropriate. Thus it would be appropriate to say when they first try they have disadvantage. 

 That interpretation is incorrect. A grapple attack is explicitly a contested ability check, not an attack roll. It is explicitly NOT an attack roll. Therefore, this cloak would RAW not affect a grapple. Of course, the DM can rule any which way and override the written rules, but claiming that such a ruling is based on what the rules say is incorrect.

As a player who doesn’t access the DMG or information my character(s) wouldn’t have (yes I guess I’m a rules nerd that way), I’m interested in what kind of effect this cloak would give to a rogue’s sneak attack ability. My thinking is that since the target might be looking for an attack from point a, an attack originating from point b would be a surprise. Example: a rogue with a COD appears to be standing at 11 o’clock to a target. When the target receives a dagger strike into their right ribs from 1 o’clock instead of their left ribs from 11 o’clock, would that count as a sneak attack? 

Quote from SamuraiHoss >>

As a player who doesn’t access the DMG or information my character(s) wouldn’t have (yes I guess I’m a rules nerd that way), I’m interested in what kind of effect this cloak would give to a rogue’s sneak attack ability. My thinking is that since the target might be looking for an attack from point a, an attack originating from point b would be a surprise. Example: a rogue with a COD appears to be standing at 11 o’clock to a target. When the target receives a dagger strike into their right ribs from 1 o’clock instead of their left ribs from 11 o’clock, would that count as a sneak attack? 

Nothing in the rules of either Sneak Attack or the Cloak of Displacement even remotely suggests that it would grant you the Sneak Attack bonus. If your DM thinks it is thematic and appropriate to work like that they might change the rules in your favor. If I was your DM, the mere suggestion might be a good enough joke for me to give you Inspiration the first time I hear it, but other than that the answer would be "absolutely not".

Combine this with a high AC and your practically untouchable .

No, it's like they see you a few inches away from where you actually are

This is functionally similar to the Blur spell, but active during all waking hours, without concentration. Just like with Blur, this wouldn't hinder Grapple attempts upon you, as those are defined as Ability Rolls, not Attack Rolls. 

Likewise, Tremorsense & Blind Sight (especially as expanded in the Fighting Style: Blind Fighting) likely would not be affected by this, as they do not rely on visual sight to hit you; however I'm not aware of any clear-cut sage advice on this, only implications; so your GM's ruling may vary!

True Sight would of course see right through this, to allow attacks without disadvantage (explicitly sees through Illusions).

Would this be ideal while flying?