Personally I don't see the problem with them, but that being said, I do own one so my opinion is slightly biased. The majority of people don't understand their real purpose. Its not to do with protecting links, because they do little in that sense, and its more to do with keeping stuff off search engines.
Downloaders are not always fans but if you have firefox (and the flashgot addon) and/or jdownloader, they are hardly an issue.
As I see it - this really depends on what and where do you want to obfuscate and the "level" of obfuscation.
For example a very basic email link obfuscation simply confuse email address grabbers, while real visitors get normal clickable mailto: link is great, or in case with affiliate links, simple cloaking via hidden redirection to the merchant does wonders too.
And in terms of protection links from takedown notices, there are few keypoints. If you are owner of the website and get a commission from people clicking links (buying accounts via clicked links) you would not want to have 3rd parties link obfuscation services because in this case you will not get a commission, and you would want to protect your visitors from potential fake or malicious link hidden behind that crypted url. Also many of normal visitors are put off by amount of banners, popups and hard to recognize captchas that many of popular link cloaking services got these days and that can hit your visitors number too.
So, if you are owner of the website, then, from my experience, implementing your own link cloaking solution will give you best results. Visitors won't be nagged by 3rd party services, you keep getting your commission/sales/whatever, search engine wont index your links, and to manually report them someone needs to extract real links first and it can be very time consuming. Wordpress, vBulletin, IPB, Drupal already got many free and paid solutions for this (im sure so does many other scripts).
And, answering the threads title question - from my personal experience, obfuscated/cloaked links don't put people off, its the bad quality of the chosen obfuscatory solution can put people off in a long term.
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