Most Helpful Guy
Most guys don't feel comfortable calling a girl beautiful, sexy, or hot, because some women are offended by these words. These women claim it is objectifying, and do their best to make us guys feel like perverts. As a result one of the few safe words that men can use to complement a girl is cute. I have heard a lot of women complain they never get called anything but cute, even though they want to be called sexy, and hot. So it sounds like those other women, are ruining it for the rest of you girls.
Does cute mean the same thing as pretty? There are a lot of different types of pretty, and cute is just one type of pretty, but most guys substitute the word cute to mean all types of pretty. Most guys will only use the word cute, to describe girls. Guys don't normally use the word cute, for anything except, for pretty girls. It just isn't manly for a guy to see a plush toy and say that it is cute.
A guy calling a girl cute, is almost always never a joke. It sounds more like your sister is jealous of the attention you get, and has convened herself that it is a joke, because the truth is too hard for her to accept.
A cute girl is the best kind of pretty, to bring home to mom.