The cursor setting is only valid for the editor area. It does not control how the cursor behaves or looks like in dialogs etc.
If Do not blink is selected, then the cursor will not blink in the editor, otherwise it will blink with the rate assigned in the Blink interval field.
The Always use block option will when selected, make the cursor always use a rectangular block shape, both in insert and overwrite modes. If the Use thick cursor in insert mode option is selected, then the insert shape cursor will be thicker (and more visible) than what is normally is. The option has no effect if the Always use block option is selected.
Controls how the cursor is displayed when the user moves the mouse to another window.
Stop blinking. Stop blinking but remain visible.
Hide. Make the cursor invisible.
Do nothing. Ignore focus changes.