There are no VMware Tools installed in this virtual machine, so you'll need to use the Command key to capture/release the mouse; move your paddle by moving your mouse up and down. Rumor has it that VMware wrote this tool to help with some aspect of the program's development, but I think they did it just because it's cool and retro.
You can delete the virtual machine any time you like; it can be easily recreated via the same keyboard shortcut.

