What highlighting tools for Mac that I can use when I demo my product?

A simple tool that can highlight your cursor location during a presentation

I'm not sure from the question if you're asking about something that can do that during a live presentation, or just allow you to edit after recording your screen. If you mean 'live', I'm not sure, but Screenflow provides a decent amount of tools to help create good screen casts. You can pause the video portion ('freeze' it) while the audio track carries on, and you can add in mouse highlighting, add shape overlays, text, etc. Have used screenflow from v3 to v6 and still find I fall back to it multiple times per month for various projects.

This software meets your needs in the case if you don't mean a live demo. StepShot Guides PRO can record all your clicks as screenshots which can be annotated with adding arrows, lines, highlight boxes, text boxes, and so on - that's what you need. And to create a video demo of these screenshots - just choose the export to video format and you'll be able to record your voice for audio narration or make use of auto-narration available in several languages and voices.

You could just capture the current screen in Skitch (⌘+shift+5), while screensharing, annotate the screenshot with what you want to highlight (Skitch is the fastest tool I know of to annotate a screenshot in a readable way, with text, rectangles, circles and arrows). When you're done, discard your screenshot and resume your demo?

This is the easiest tool to create awesome mokcup videos.

It's a simple mac menu bar app to annotate anything on screen. With this you can also highlight your cursor or mouse pointer to grab the attention of your viewers.