The PS/2 mouse interface originally appeared in IBM's "Personal System/2" computers in the late 80's and it remains a widely-supported interface. However, USB has quickly caught on these last few years and will eventually replace the PS/2 interface entirely.
The PS/2 mouse interface utilizes a bidirectional serial protocol to transmit movement and button-state data to the computer's auxiliary device controller (part of the keyboard controller). The controller, in turn, may send a number of commands to the mouse to set the report rate, resolution, reset the mouse, disable the mouse, etc. The host provides the mouse with a 5V ~100 mA power supply.