The Navigate Cursor History plugin enhances navigation in Obsidian by tracking the most recent 50 cursor positions, allowing users to move back and forth between them, similar to functionality in VSCode. This feature makes it easier to revisit recent edits or views within a note. The plugin automatically records cursor positions every second, though the history is not saved permanently. If a new move is made during navigation, the forward history is reset. Users can also assign hotkeys for quick access to the 'Go back' and 'Go forward' commands, improving workflow efficiency.