Hi
can someone help me with my latest project, i.e to control a PC mouse, via atmega8.
My main aim is that, when i connect my entire apparatus to the system, the computer should recognize as an HID device. I read we have drivers named as V-USB that we can use, but i find it all confusing. Can someone please help me out?

 

Well, I can't help you directly but here is a keyboard that is based on the ATMEGA8 you could probably tweak into a mouse.
http://www.obdev.at/products/vusb/hidkeys.html

Here is a mouse/magnetometer based on the ATMEGA8
https://github.com/denilsonsa/atmega8-magnetometer-usb-mouse

It looks like bit-banged HID implementations for the AVR are starting to use larger and more modern parts such as the ATMEGA168.