Bone attitude during flexion of the fingers
The knuckles are much more prominent when the hand is clenched, or the fingers are flexed - this is because when the phalanges are pulled toward the palm, the metacarpus (note: term for all metacarpal bones taken as one unit) is largely stationary. The carpals slide down, and the heads of the metacarpals are made to be the prominent protuberances.
On a side note, the source of the sound made while cracking your knuckles still hasn't been definitively proven. However, the "cavitation" theory, that small cavities of partial vacuum form and rapidly collapse within the synovial fluid, is the most well-supported and widely-theorized.
Oh, and you won't get arthritis by cracking your knuckles, unless you have some preexisting condition that I've never heard of (granted, I've never heard of most conditions that affect bones...). There have been several large, long-term cohort studies that show no correlation between arthritis and knuckle cracking. Well-designed studies aside, there's also Dr. Donald Unger (winner of the 2009 Ig Nobel Prize in Medicine), who, after being told by his mother that he'd get arthritis if he kept the habit up, cracked the knuckles on one hand every single day, multiple times a day, for over 60 years. He never cracked the knuckles on his other hand. Neither of them developed arthritis or any other condition. Now THAT'S a dedication to science!
Applied Anatomy; the construction of the human body. Gwilym G. Davis, 1915.