The "correspondent" character in this story, a figure based upon Crane himself, whose experiences drove this tale, cannot see anything beyond the boat but water. The water seems to stretch out endlessly in all directions. The captain of the boat, however, is more used to this sort of voyage and has a more practiced eye for spotting things at sea. As such, he is able to make out the lighthouse at Mosquito Inlet even though it is very far away, only a tiny thing on the horizon. It is this lighthouse which the correspondent describes as a "small, still thing." When he is finally able to see it himself, he is astonished that the captain (and, indeed, the cook), both well-versed in the way to conduct oneself on water, should have been able to spot it.
Crane uses a simile to compare this lighthouse to "the point of a pin." This simile helps to convey the sheer tininess of the lighthouse as compared to the vast horizon. A pinpoint, or pinprick, is often used in English to represent the tiniest possible element of anything, as when we describe a pinprick of light. In this situation, the lighthouse breaks into the seascape as an image as small as a pinprick but significantly more important to the occupants of the boat.