Are you trying to get the  position of mouse pointer relative to element ( or ) simply the mouse pointer location
Try this Demo : http://jsfiddle.net/AMsK9/
Edit :
1) event.pageX, event.pageY gives you the mouse position relative document !
Ref : http://api.jquery.com/event.pageX/
http://api.jquery.com/event.pageY/
2) offset() : It gives the offset position of an element
Ref :  http://api.jquery.com/offset/
3) position() : It gives you the relative Position of an element i.e.,
consider an element is embedded inside another element 
example : 
<div id="imParent">
   <div id="imchild" />
</div>
Ref : http://api.jquery.com/position/
HTML
<body>
   <div id="A" style="left:100px;"> Default    <br /> mouse<br/>position </div>
   <div id="B" style="left:300px;"> offset()   <br /> mouse<br/>position </div>
   <div id="C" style="left:500px;"> position() <br /> mouse<br/>position </div>
</body>
JavaScript
$(document).ready(function (e) {
    $('#A').click(function (e) { //Default mouse Position 
        alert(e.pageX + ' , ' + e.pageY);
    });
    $('#B').click(function (e) { //Offset mouse Position
        var posX = $(this).offset().left,
            posY = $(this).offset().top;
        alert((e.pageX - posX) + ' , ' + (e.pageY - posY));
    });
    $('#C').click(function (e) { //Relative ( to its parent) mouse position 
        var posX = $(this).position().left,
            posY = $(this).position().top;
        alert((e.pageX - posX) + ' , ' + (e.pageY - posY));
    });
});