Chosen Solution
We have checked for liquid damage in keyboard and trackpad. Sensors are ok. Current os is lion. System pref settings are ok. Cursor starts behaving erratically and move here and their without touching trackpad at all. Please suggest a solution.
This is a fairly new machine, Warranty?? ( no water damage) If not under warranty having already checked everything ( connections, resetting system preferences etc)…. you could replace the trackpad. However this may be a problem caused by Lion. ( i have heard of people complaining about this issue with Lion and the latest update i don’t recall if it was for this type of machine). See if an apple brand external mouse does the same thing.. if it does take it in for apple support if you still have a warranty. You could also boot the laptop form an OSX DVD ( Snow Leopard that came with it) and see if it still has this problem…… go from there.