The gesture software can be used to hide the mouse cursor. The feature uses an undocumented API (presumably a feature not encouraged by Apple) to hide the cursor so there are no guarantees it works 100%. This feature can be enabled in the gesture settings dialog, Other Settings tab, ‘Hide Mouse Cursor during touches’ checkbox. The cursor is enabled as soon as the cursor is moved by something other than the touch screen, including a mouse or trackpad.

We have found that in some circumstances the cursor is made visible, such as switching apps or touching into flash movies or moving over the system dock, so since gesture version 2.0.21 the cursor is periodically hidden if it is found to be visible. The periodic test to check the cursor is started when the "hide cursor during touches" feature is enabled, but it will only hide the cursor if it is supposed to be hidden, such that if it is being shown due to mouse/trackpad movement then the cursor will stay visible until the next time a touch begins.

Unfortunately, if an application constantly forces the cursor to be visible, such as if the cursor is over a flash movie, then the cursor will stay visible.