>And i have heard that it can scratch it and/or the water can damage it
Rough cloths and excessive water could do damage. Use some common sense and you'll be fine. Of course, if you're just cleaning dust then canned air is ideal.
No, a damp cloth isn't such a good option. With certain flat screen monitors (especially the older models), you have to be careful of microscopic droplets of water getting caught under the screen. Damp cloths are fine for some screens, such as those for the iPod.
I bought some cleaning kit for my laptop a while back that came with like 4 things to clean with. It was fairly expensive for what you got, so if you find a better option using home equipment I would go with that.