The VoiceOver cursor gives a visual presentation of the location of VoiceOver focus. It typically does this by placing a solid border around the element - be that a button, a menu item, a block of text, etc.
Very occasionally, this cursor will either disappear completely or become very large (even larger than when you have the large cursor option enabled in Settings).
This behaviour does not appear very often (typically it may be as infrequent as once every couple of weeks). There appears to be no pattern to what will trigger it, and we have yet to find a way to reproduce it.
When this behaviour has been triggered, the typical pattern seems to be that the cursor will randomly switch between normal, the extra large state and gone completely as you swipe between elements, move between pages and switch apps.
When this problem does present itself, it may require you to do a soft/hard reset of your device to completely flush this behaviour and get the cursor back displaying correctly again. Pressing the Wake/Sleep button 6 times in quick succession may also flush the problem, as may simply turning VoiceOver off and back on again.