Most laser pointers are either Class II or Class IIIa lasers in the US. In many other parts of the world, home laser pointers are restricted to Class II lasers, which are safer.
According to the Wikipedia article on laser safety,
Class II: The blink reflex of the human eye (aversion response) will prevent eye damage, unless the person deliberately stares into the beam for an extended period. Output power may be up to 1 mW.
Class IIIa: Lasers in this class are mostly dangerous in combination with optical instruments which change the beam diameter or power density, though even without optical instrument enhancement direct contact with the eye for over two minutes may cause serious damage to the retina. Output power does not exceed 5 mW. Beam power density may not exceed 2.5 mW/cm2 if the device is not labeled with a "caution" warning label, otherwise a "danger" warning label is required.
From these definitions, we can see that laser toys can be harmful if a cat looks into the beam for a long period of time. Laser toy play typically involves a lot of movement so that the likelihood of your cat staring into the beam for over two minutes is low (you would notice and move the beam). However, when I used to play with laser toys with my cats, one cat was smart enough to stop chasing the dot and would just stare at my hand. I do not know how he would react if the beam was pointed directly at him (if perhaps I wasn't paying attention, or was watching another cat).
There are instructions online to make items such as CD players into stronger laser pointers than you can buy. Since these lasers are of an unknown power, I would not recommend using these for play. Only use commercially available laser pointers so that you can be sure that they are not too dangerous.
Personally, I do not use laser toys because I believe that structured play time is a bonding experience between me and my cats. I also believe that play should be structured around meal times to enforce the hunt-eat-groom-sleep cycle that cats naturally fall into. While occassional hunts may fail, I believe a cat should not be constantly frustrated by hunting sessions that never give the cat the satisfaction of a "kill".