Cute can also mean good-looking, but in a different way than someone who is "handsome."
Someone who is cute has some sort of feature, either physically or in his personality, that makes him extremely appealing. You just want to pick him up and hug him. For example, Ringo Starr was never classically handsome, but he was darned cute.
Speaking of Yellow Submarine, perhaps a better example of cute in a huggable way would be Jeremy Hillary Boob, PhD, that little guy from the film.
PS Love the new avatar, Mudgy! Oddly enough, that was just how I pictured you.
Quite fetching don't you think? And yours aint too bad either