How to Assign a Cursor's Hotspot
Every Windows Cursor has what's known as a "hotspot". This is a specific pixel in the cursor's graphic that marks where the mouse pointer actually is in relation to the image itself. Most of the time, the hotspot is in the upper left corner of the graphic, as that's where cursors usually point.
But sometimes, there might be a better location somewhere else on the cursor. For example, a cursor that represents scrolling may work better if the hotspot is somewhere near the middle of the graphic.
In Mike's Sprite Editor, you can assign the hotspot by selecting the menu option "Assign Hotspot" under the Image menu. This will switch the editor into a new mode specifically for placing the hotspot. In this mode, the image is shown in grayscale, with the hotspot's location marked by a red plus.
To set the hotspot, simply left-click on the desired pixel. You can also clear the hotspot by with a single right-click.
When you're ready to resume normal editing, switch to any of the Tools.
Note that the hotspot is only saved when you save the image as a Windows Cursor. Using any other format will result in the hotspot being quietly discarded.