I recently purchased Microsoft's Wireless Optical Desktop 700.
Both devices were working fine until i left the system ideal for a long time (1 hr).
Now the keyboard was still working but mouse was not.
I tried many things like
1) Restarted the system.
2) Took out batteries of muse.
3) Clicked on re-link button on transmitter.
None of the above worked and after searching the issue on internet, i found a simple way to solve it.
I clicked the re-link button on the transmitter/controller and then light stared blinking on the device, thereafter I instantly pushed the "Connect" button the the bottom of mouse and it worked.
The only thing you need to do is click the Connect button of mouse when the light of controller is blinking.