An example of a cursor effect is where you have a trail of images following the cursor around as you move it with the mouse. This can involve some physics aspects - like gravity and elasticity, or it could involve flocking AI, or particle effects.

Another example, a cursor effect where the cursor becomes a magnifying glass and everything under it became enlarged and distorted.

Those were examples, but there was no restriction. It could have been something completely original. So long as it involved use of the cursor in some way, and it had some kind of effect, then it was allowed.