The Pointer Fairy does not play any role at all in the game and is purely used when the Wiimote cursor is pointed at the screen. The player uses the Pointer to select options, such as when saving or when yes or no prompts appear on the screen. When the player is accessing their inventory, they can select items by pointing the cursor at them.
Despite it being present while Link is walking around, much like Navi or Tatl did in prior games, the Pointer Fairy never interacts with Link at all. Additionally, in the settings of the game the player can turn the pointer settings off, which will cause Link to aim with the C-stick, instead of the Wii Remote. This will cause the Pointer Fairy to no longer appear.
The Pointer Fairy has a physical resemblance to that of Navi from Ocarina of Time with its blue color and wings. This is likely just a reference to Navi and has no actual story connection.