Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
The first thing that came to mind was that you have magnification enabled and activated. Try hitting command option - to see if you are somehow zoomed in. The default state for this makes the screen move around when the mouse is moved.
 
moving display fix-it

You probably found your answer already, but when I was searching for an answer, this thread was the first thing that popped up, and it wasn't very helpful. But I did eventually figure it out. Here's what you've got to do:

Choose Apple menu > System Preferences
Select Universal Access
Click the Seeing tab
Click the Zoom: Off radio button
 
Thanks

New to this thread but.... thanks very much Katy - my nephew was playing on my computer and left it in this state.

But it is fine now.

Cheers
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.