Does cygwin (1.7.x) understand Windows NTFS junction points (as created by mklink in Win7/2008 or sysinternals' junction.exe)?
How do they differ from a symbolic link as created by "ln -s "?
Yes, Cygwin 1.7 does understand NTFS junction points and also NTFS symbolic links (as introduced with Vista). They appear as symbolic links to Cygwin programs, so that for example deleting such a link will only delete the link rather than the file being pointed too.
The reason that Cygwin doesn't use NTFS symbolic links when creating Cygwin symlinks is that only elevated administrators are allowed to create them (unless a registry setting is changed) and that they don't have all the required POSIX semantics.