Mouse.setGrabbed(true);

Cursor emptyCursor = new Cursor(1, 1, 0, 0, 1, BufferUtils.createIntBuffer(1), null);
Mouse.setNativeCursor(emptyCursor);

... in loop ...
if (emptyCursor==null && Mouse.isCreated() && Mouse.isInsideWindow()) {
        int min = Cursor.getMinCursorSize();
        IntBuffer tmp = BufferUtils.createIntBuffer(min * min);
        emptyCursor = new Cursor(min, min, min/2, min/2, 1, tmp, null);
        Mouse.setNativeCursor(emptyCursor);
}

System.out.println( "1 bit transparency? "+
     ((Cursor.getCapabilities() & Cursor.CURSOR_ONE_BIT_TRANSPARANCY) 
     == Cursor.CURSOR_ONE_BIT_TRANSPARANCY) );
System.out.println( "8 bit transparency? "+
     ((Cursor.getCapabilities() & Cursor. CURSOR_8_BIT_ALPHA) 
     == Cursor.CURSOR_8_BIT_ALPHA) );