When running Vim in an xterm, you can either let Vim control the mouse
or let xterm control the mouse. This is configured by the 'mouse' option.
If the 'mouse' option is not set (or set to the default value), then Vim will
not control the mouse. You cannot move the Vim text cursor using the
mouse. When you select some text using the mouse, xterm will copy
it to the X11 cut buffer. When you press both the mouse buttons,
xterm will paste the text from the cut buffer.
If the 'mouse' option is set to 'a' or some other value, then Vim controls
the mouse. The mode (normal or insert or visual, etc) in which Vim
controls the mouse is configured by the 'mouse' option. You can move
the Vim text cursor using the mouse. When you select some text,
the 'clipboard' option setting is used to determine whether to transfer
the selected text to the clipboard or not. The default setting is to
transfer the selected text to the clipboard. If you want to use the
xterm selection mechanism in this mode, then you can press the
<Shift> key. If you press <Shift> key when selecting text using the
mouse, then Vim doesn't control the mouse and xterm controls the
mouse.