I have recently compiled a new kernel(2.4.22) on my Fedora Core 1 Linux. In order it to recognize my three button USB mouse, I have selected some properties during kernel configuration:

Under the "USB support" section I selected:
1) Support for USB support
2) UHCI Alternate Driver (JE) support
3) Preliminary USB device filesystem
4) USB Human Interface Device (HID) support

Under the "Input core support" section, I selected:
1) Input core support
2) Mouse support

Although the system does not give any errors regarding the mouse during startup, my mouse does not move at all when system opened.

What should I do. I would be glad if anybody helped me.

Check the dmesg. If you have the right usb driver installed, you should see messages from the driver that it has found the usb controller and hub and assigned it an IRQ and so on. You will still have to configure X or whatever you're using that requires mouse support to use the usb mouse.

How can I configure X? Since I cannot use my mouse I have to do it on terminal. Do you know instructions for that?

The best way is with a distro-specific tool; ask in a Fedora forum. (I use Debian, where I do dpkg-reconfigure xserver-Xfree86).