pointer (or "mouse pointer"): the object on the
screen that moves in response to mouse movement. Usually the pointer
is arrow-shaped, but for certain tasks, it can change
shape.
(Possible pointer shapes: arrow, I-beam, watch, plus
sign, etc., etc.)
cursor (or "insertion point"): special symbol
that indicates where the next character you type will appear on your
screen. It is usually blinking on and off.
(Possible cursor
shapes: blinking vertical line; on very old systems: blinking
underline)
Why does it matter?
The cursor shows where you are right
now.
The pointer shows where you will be shortly.
The cursor changes position in response to (a) arrow keys, (b) tab
key, (c) mouse + click.
The pointer moves in response to the mouse
movement.
References:
http://www.atis.org/tg2k/_cursor.html
http://www.scala.com/definition/pointer.html
http://www.oit.ohio-state.edu/glossary/#c