did you have a virus recently? Because working in a computer shop, we get a good amount of clients that get viruses, some of which attack either the registry and/or driver services rendering the mouse and sometimes keyboard useless.
For the mouse:
open regedit.exe (start, run). Navigate to the following:
HKEY_LOCAL_MACHINE -->SYSTEM -->CurrentControlSet -->Control -->Class -->
{4D36E96F-E325-11CE-BFC1-08002BE10318}. You'll see an entry for UpperFilters. If it says anything other than "mouclass", modify the value so that its "mouclass" without quotes.
If that doesn't work:
2nd fix: Note this is most likely not the issue though since if the virus disabled this service, both your mouse and keyboard would be disabled. Almost forgot how to do this without my special boot disk software from work, but this should work:
Navigate to HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\i8042prt]. The "start" entry should be set to 1. If it isn't, then set it to Decimal 1.
Reboot.
If that doesn't work, post back.