I don't know Cursor, but VS Code is a very full-featured editor with many years behind it; I rather doubt an upstart editor could achieve full feature parity with it so quickly.
But that's almost beside the point: even if it had perfectly identical functionality, people would still want to use VS Code, if only for its well-established ecosystem of extensions.
Cursor is a fork of VS Code so most of the UI is identical and it can use the majority of extensions. Some extensions are MS only though and they may start using this as a moat, who knows!
Is that really true? According to https://news.ycombinator.com/item?id=42931088 ("VSCode Marketplace Web Pages No Longer Allow Direct VSIX Downloads"), you can still manually download extensions via cURL et al, if you really want to. Probably will disappear in the future though.
One example: Microsoft's closed-source Pylance extension (their replacement to the previous open source Python language server) has DRM that will refuse to run on non-Microsoft builds of VS Code.
Wow, I had no idea. Been test driving VS Code for a little while, and while the constant popups/notifications are distracting and annoying, extensions with DRM in them kind of makes it a lot less interesting.
But that's almost beside the point: even if it had perfectly identical functionality, people would still want to use VS Code, if only for its well-established ecosystem of extensions.