Optical mouse from inside: http://www.gadgetrivia.com/photos/o/56422-best_optical_mouse.jpg (this isn't a retractable mouse, but the inside looks exactly the same, only the cord this different which doesn't matter in this situation).
Here are instructions for optical mouse repair: http://www.thenetguruz.com/hardware/diy-optical-mouse-repair/
But if your mouse doesn't work first plug the mouse in the USB slot and check the laser beam under the mouse - if there is no light, the mouse is dead, and you should return it to the seller for replacement. (Such a thin cable of the mouse is very vulnerable and might break easily. More over I find many negative reviews about this rectractable mouse - so if your seller offers to replace it - ask for a different model or test it with your laptop right in the shop before bringing it home.)
2) Here is a solution that already worked for another user, but was very complicated: http://forums.toshiba.com/t5/Keyboards-Touchpads/USB-mouse-not-recognized-drivers-can-t-be-installed/m-p/23526
3) Or alternatively download and install a free driver updater software, e.g. http://www.innovative-sol.com/drivermax/index.htm - let it scan and update all your missing drivers - it may fix USB general problems if this causes also the mouse problems.
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