E.g. when you hit the side of your monitor your cursor can't go any further, and more of an example is when in microsoft paint, and your choosing a colour from the RGB table, it won't allow your mouse to go outside of the rectangle while your mouse is down..
my question is how would you implement that in c++ with win32 api?
You can use the following function from Microsoft
BOOL WINAPI ClipCursor(
__in_opt const RECT *lpRect
);
See http://msdn.microsoft.com/en-us/library/ms648383(VS.85).aspx