The 1351 sends an *absolute* mouse position, but it is only 6 bit. The C64 has to convert this into a relative movement, and then apply this relative movement to the absolute mouse position on the screen.
It's quite complex but also powerfull: The mouse polling rate is completely up to the application, up to a maximum up 2KHz which should be enough. Most programs handle the mouse in an interrupt, so it is polled 50 times per second and if done in a raster interrupt perfect VSYNC.
This was something not possible on PC's for a long time: Serial mice can only do 20-30Hz depending on the exact protocol. Only with USB mice we can poll the mouse at a high frequency up to many 100Hz per second, but still, the optical sensor in modern mice often sends relative movements at a fixed frequency, neutralizing the effect of high frequency polling.
If you use a 1351 you usually notice how smooth it is. I still have the impression that many low-cost PC mice are inferior, allthough with a good "gaming" mouse, the PC experience can also be quite good nowadays.