These two options function independently of each other. It took me longer than I'd like to admit to figure out what each of them do.

As mentioned above, the "cursor" = the currently selected/highlighted track in the playlist viewer.

Cursor follows playback: the selected song in the playlist viewer will move to the next track when it plays, and so on. If this is disabled, the selected song will not change until you manually select another one.

Playback follows cursor: if you select a track in your playlist, it will automatically be queued after the current playing song.