The story has been told to the point where it is a legend: Xerox could have been Apple before Apple, and maybe could have beaten HP to the laser printer, but Steve Jobs and others took advantage of their ideas.
According to Malcolm Gladwell in The New Yorker, the story isn't as cut and dried as some people tell it. Xerox was running a research facility (Xerox parc), not a facility to develop consumer products. They had a prototype of a mouse, but it was too big an clunky for an ordinary consumer, and it probably cost something like $16,000. Having seen it, Jobs hired someone to develop a small, lightweight unit that would cost a couple of hundred. Similarly with the windows interface.
The story that I did not know at all before was the one about laser printing. An optical engineer named Gary Starkweather, actually employed by Xerox, was convinced that it would be possible to adapt a photocopy machine to do laser printing. Xerox had little interest in the idea, although they did pay him to move to parc and explore his ideas. A wonderful, supportive employer, but not a market or consumer-oriented innovator in products that we now know were worth a fortune. Xerox took some big steps toward being a high-tech company, but now they seem to have missed out on the biggest developments--including those that came from their own labs and offices. Gladwell defends Xerox--they pursued the business that they had, not some speculative other business.
My son (who is studying to be an engineer) says Gladwell takes his contrarianism (the kind of thing for which Slate is famous) too far. Starkweather was an engineer--he did his job. Somewhere at senior levels in Xerox it should have been possible to apply marketing and business development skills, or hire people with those skills, and develop a laser printer, rather than leaving the business to HP and others.