Cursor offers two customization mechanisms for its AI agent: rules (.mdc files) and skills (SKILL.md files). Rules are config-driven and load deterministically via alwaysApply or glob patterns, making them ideal for coding standards, naming conventions, and hard constraints. Skills load intelligently based on relevance, making them better suited for multi-step workflows like deployments, PR templates, and onboarding docs. Skills are also portable across tools like Claude Code and Copilot, while rules are Cursor-specific. When conflicts arise, rules take priority. A practical migration guide helps developers decide what to keep as rules, convert to skills, or delete entirely.