almost happened to me...
He didn't really cheat...not yet neway. While I was still going out with this guy, one of my best friends asked him if he had feelings for her (since she did for him). She told me he answered "yes". But he never really acted on it (IE: go any further into a relationship with her), nor did he distance himself from her, nor did he down right correct his statement and reject her.
At one point we decided we needed some time apart from each other to think things through for other reasons and the girl told me about it (cuz her concience was bugging her). When I confronted him about it, he denied he ever said "yes", and said he didn't see it as a big deal and decided not to tell me about it. Dispite the girl telling him, a little while after, that I should know. I have more than enough reason to believe the girl's story, and more than enough reason to doubt his story. After that we never got back together and he thinks I hate his guts (even tho i've moved on).
Had he admitted and come clean with all this, I would've forgiven him considering nothing really happened and we were having a rough time at the time. I can't stand a guy who won't admit that he did something wrong, and personally hate lying from anyone.
But in the end, it depends on the circumstances and the relationship in question. There's no universal answer of to forgive or not to forgive.