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It depends why you're hiding things. If you look at my site, there are a bunch of divs at the top of the page set to display:none in an external CSS file, but another external JS makes certain divs visible when you mouseover different elements.
It's bad to hide things in the sense that it's not there for all intents and purposes, but it's pretty common practice to have things not display, so long as there's a method of displaying them. This web site does this same thing; if you click the word Search at the top, a flyout becomes visible ... technically it's "hidden" stuff, but it's not shown because 90 % of the time it's not useful, and will just clutter things. The other 10 %, users can get to it.
Someone smarter than me will have to say whether search engines decide what type of hiding is going on by algorithm or by hand. Personally, I don't think that's enough to trigger a red flag in their server; I do all my html by hand across 160 pages, and had set an element to display:none in CSS to hide it until I went through each page and deleted it.
What Angelosanto came up with is actually really clever. The text is machine readable, but it lets you use fonts with impunity.
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