Yes, the cloak is an Elven cloak from Lórien, woven by Galadriel herself, to hide the Fellowship from "unfriendly eyes" (actually all eyes, except those of Elves). They were also meant to be used in TTT with Aragorn, Legolas, and Gimli hiding from Éomer & Co., but that would've given that power away....<P>In the extended DVD, the scene in which Galadriel gives the Fellowship the cloaks is included. ("Never before have we clad strangers....")<P>The "all-seeing" eye is the Eye of Sauron, which can basically see anything that it is focused on (to a certain extent).
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