XFree 4.x
Second Mouse in X mini-HOWTO
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5. XFree 4.x

With XFree 4.x the task is even easier. First, the primary mouse, usually present in the config file already: 

Section "InputDevice"
        Identifier  "Mouse0"
        Driver      "mouse"
        Option      "Device" "/dev/mouse"
        Option      "Protocol" "PS/2"
        Option      "Emulate3Buttons" "off"
        Option      "ZAxisMapping" "4 5"
EndSection
To add another mouse just copy the above section and modify it, so that it reads: 
Section "InputDevice"
        Identifier  "Mouse1"
        Driver      "mouse"
        Option      "Device" "/dev/input/mice"
        Option      "Protocol" "IMPS/2"
        Option      "Emulate3Buttons" "off"
        Option      "ZAxisMapping" "4 5"
EndSection
Well, this way you can define as many additional pointers as you wish, and the same applies to joysticks and tablets.

To make both mice work together, there's one more change to be made to the XF86Config file. There is a section called ServerLayout where all the components are specified. Here's how it looks before adding a second mouse: 

Section "ServerLayout"
        Identifier "XFree86 Configured"
        Screen      0  "Screen0" 0 0
        InputDevice    "Mouse0" "CorePointer"
        InputDevice    "Keyboard0" "CoreKeyboard"
EndSection
And after adding the second mouse: 
Section "ServerLayout"
        Identifier "XFree86 Configured"
        Screen      0  "Screen0" 0 0
        InputDevice    "Mouse0" "CorePointer"
        InputDevice    "Mouse1" "AlwaysCore"
        InputDevice    "Keyboard0" "CoreKeyboard"
EndSection

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XFree 3.x Alternatives