Sound is caused by the cracking of knuckles when a bubble which has formed in the lubricating fluid (the synovial fluid) which surrounds the two bones of the knuckles bursts.
Normally there is a lubricating fluid which prevents the two bones which forms the knuckles from grating against each other. This fluid contains tiny bubbles which cannot be seen by the naked eye.
So when the knuckle bones remain close together the fluid is under pressure and the bubbles remain tiny.
But when one clenches his fist, the bones are pulled apart which causes the bubbles to join together to form one large bubble. Then when one works the fist, the pressure changes and makes the bubble to burst which then produces a loud cracking, noise. Doctors are not sure whether cracking them is harmful or not, though there is a belief that cracking ones knuckles could make them large and unsightly.