Cheaters find and exploit loopholes in the game's code and use them to level their characters skills, become stronger and kill other players, give themselves items, or even do impossible tasks (such as killing non-player characters).
Cheating causes problems for those honest students by unfairly giving cheaters the academic advantage, which in turn makes it harder for those who did study to get the grades and recognition they deserve.
While you may be the victim of cheaters in a live game, it is less likely that someone will be able to cheat with an online game, assuming that they system has been designed and configured properly.
Other PSX cheat devices actually allow cheaters to bypass the PlayStation's copy protection schemes and browse the contents of the game CDs in the comfort of their living rooms.
This kind of poker cheat is fairly easy for the online casinos to detect, and some casinos automatically assume a disconnect is a fold, taking away the cheaters' advantage.