I'm pretty sure that's an old wives tale. The "cracking" you hear is just a build up of natural gases in the synovial fluids in your joint capsules bursting when you stretch the joint. You can however, stretch your ligaments over time if you are constantly cracking your knuckles.
And it is my biggest pet peeve. I don't know why, lol, but the sound of cracking knuckles sends chills up my spine! I HATE it!
edit*** a quick google search confirmed. It's just an old wives tale'