It's a compliment. I seriously doubt guys have the same grading scale you do for what each comment means. Mainly it means they find you attractive and want you to respond to them. Personally I think "hot" is way overused and not necessarily the kind of look that attracts sincere guys that would be interested in you as a girlfriend, but that is just me.
It's rediculous to think guys need a reason from you before they'll start hitting on you... we simply can't help ourselves. It's your job to either ignore us, flirt back, or tell us to leave you alone.
Secondly, you should assume everything is a compliment - otherwise you'll spend your life caring what other people think of you, and that's a waste of energy. If you like the compliments, then you'll hate the insults. But if you're complete, secure, mature, and powerful, you'll find out that it's not that hard to ignore the praise and insults of those around you. And they'll love you for it.
So stop worrying about how old you are now (Over the age of 21? Then you're well over the hill and should start planning your funeral) or whether a guy thinks you're cute or hideous... and start caring if you're got enough saved up for retirement.
For some people, cute is a specific kind of good looking. For me personally it tends to mean a smaller sized, pixie-ish girl, or someone with particularly carefree or youthful facial features. I'd probably also feel more protective over a cute girl than a hot girl. A shy librarian type girl could be cute, a beach blonde could be hot. Both are good things and I would not necessarily say either one is better than the other. I think you should be flattered. :) Either way I definitely don't think it means older. If anything, cute is for younger girls. ;)
It means he thinks you're cute. It may or may not be a come-on, depending on the situation. Depending on the situation, it could even mean he doesn't like you in that way: like, you're "cute," but he's looking for someone "hot." So it really depends on how and why he said it and to whom.
I'd take it as a compliment. When I talk to my friends about an attractive girl I saw, I frequently refer to them as "cute," among other things. If I were going to compliment directly like that, I would use 'beautiful' or 'pretty', but not every guy is the same.
I know exactly how you feel except for unlike you I've been cute for 21 years, never hot or gorgeous. I've always been told cute is a good thing and a compliment but it really comes across more like, "You're cute but I'd rather have the hot girl over there," it's like being second best.