Both my girls had it.
With my second, I asked the nurse about it, because I was putting olive iol on it, and nothing was really happening - with my first I had done the same, and nothing was happening, and I ended up discovering that if I gave it a good rub with a facecloth, it scraped off most of the scaley stuff, however she seemed to lose a bit of hair (not that she had much) and it took ages for her to grow any decent hair later on, so I figured i'd done the wrong thing.
But , the nurse just said, oh no, just putting the oil on won't do anything- you've gotta rub in the oil and give it a good vigarous brush or comb and really scrape off all that dead skin.
Apparently whatever hair fell off with my first was going to fall out anyway.
So I went ahead, and meave never got cradle cap again, and has almost as much hair at 14 months as my older girl had a 3years!!!!
Just use olive oil though, not baby oil or any other kind of chemical nastiness. Do it after bath time.