All the images are listed here:

http://www.pointerpointer.com/gridPositions.json

There are around 900 of them! I'd have used Amazon's Mechanical Turk...

Very cool effect, I also wasted way to much time playing with it :)

That's what I assumed. If I just moved my mouse a couple pixels I usually got the same pointing image back. I think they just divided it up into regions and then load the appropriate image for each region.

However, if that's all they're doing, it seems odd that it takes so long to load... Maybe some of that's just a built-in delay to keep from constantly cycling images from someone who's bumping the mouse.