The misconception comes from a common sense argument that cracking your knuckles rubs away cartilage, eventually causing arthritis. However, no medical study has shown this to be true. In fact, studies show that there are no harmful physical effects to cracking your knuckles.
That doesn't mean you should freely crack your knuckles. If you are experiencing pain while cracking your knuckles, you should stop and speak with a doctor. That pain could be another medical issue that needs checking. In addition, cracking your knuckles is annoying to many people and not considered socially acceptable. Not that you should automatically conform to social norms, but it's something one should definitely consider when around others.