Shake.

I think it's an evolutionary pattern of behavior derived from hunting in the jungles. Jiggling the tail serves two purposes, it gives the predator (cat or lion) a chance for a better footing which might make the leap higher and more precise, and it causes some noise which makes the prey raise its head and stand still, allowing the cat to better position herself for the strike.

Of course this is speculation...

I think it's one of the cutest behaviors... 

My cat does it as well . The actual reason is that the cat is testing it's footing so it can pounce as quickly as possible

Balance & control.  Think of the little wiggle some people do before the roll the ball down the bowling lane.  They are lining up the pins mentally before they act and I think that's what cats do, too.

While I'm sure either of us can look this up on the net, that's sorto of cheating, isn't it? So here's my guess, as our new cat does the same: It's an instinctive behavior that "readies" them by allowing them to stretch their back, and rear legs, the ones they use for the sudden "lunge" of attack. Remember, cats may have been staying perfectly still for more than a minute as they wait to pounce. They want to get limbered up, warmed up before they explode into action.

Because it's cute when they wiggle their little butts in the air, and their prey becomes distracted by their cuteness before it's too late...

It's all in the evolutionary pattern of behavior.

My cat hunts outside, and I never see her do the wiggle.  I think that it is more of a playful gesture because when we are playing indoors, she does it all the time.  Your cat knows you are playing and is excited about the pounce.  When my cat hunts, she prowls very slowly and then simply lunges.  It is amazing to watch.  She looks like a panther!