Xbanish hides the mouse cursor when you start typing, and shows it again when the mouse cursor moves or a mouse button is pressed. This is similar to xterm's pointerMode setting, but xbanish works globally in the X11 session.
Does exactly what it says! I set it up as a startup application so I don't even need to think about running the comand. Tip: you should use ctrl when hiding the cursor, since it literally does nothing in 99% of things.