Comment by wolrah

If I'm understanding you correctly, you have access to the entire desktop but some of it is off-screen at any given time, with the displayed area following the mouse?

This is a feature that some graphical desktops used to have back when 640x480 and 800x600 monitors were still common, the desktop resolution could be set independently of the display resolution, so you could have a larger framebuffer that your monitor presented a view in to. I recall some graphics drivers (Matrox for sure) added this to Windows 9x and called it "virtual desktop" and I know I've seen it on a few *nix platforms too.

I'd assume if the resolution adjustments work as expected below 1024x768 that whatever graphics driver OI is using in your VM only sees the virtual display as capable of 1024x768 at max and so it does this if directed to provide a larger desktop.

edit: apparently xrandr calls this "panning"