While the sequel wouldn't arrive for seven years, The Terminator's alternate ending directly sets up the events of Terminator 2: Judgment Day. To someone who only watched the first two Terminator movies, and wasn't interested in DVD extras and such, it would be pretty easy to assume that creator James Cameron didn't have a potential sequel in mind when making the original movie. Considering The Terminator's smash success, it's easy to imagine him inventing the story for Judgment Day out of whole cloth after its predecessor hit big.
However, anyone aware of The Terminator's alternate ending knows that Cameron clearly had sequel aspirations well before the film hit theaters. It's not hard to see why, as Cameron likely knew during production that he, the cast and crew had put together something truly special, a film that would stand the test of decades of time. For his part, star Arnold Schwarzenegger likely helped this notion along, as he's recalled telling Cameron how he'd like to continue the story almost immediately after production wrapped.
The existence of The Terminator's alternate ending isn't necessarily something most fans haven't heard of, but it's likely many haven't seen it, due to inconsistent availability on the many DVD and Blu-Ray editions of the film. Even more inconsistent is the inclusion of Cameron's helpful commentary track, in which he explains why the scene was ultimately cut. Either way, the scene perfectly lays the groundwork for what would become Terminator 2.
How Terminator's Alternate Ending Directly Sets Up T2
The Terminator's alternate ending is actually lead into a bit by an earlier deleted scene, in which Sarah finds out where Cyberdyne Systems is located, and tries to get Kyle Reese to go there with her to try and change the future. Reese refuses, as his mission is to protect Sarah, not attack the future creator of the Terminator cyborgs. In the alternate ending, following Sarah's climactic confrontation with the T-800 at the factory, police are shown inside the building gathering evidence. Meanwhile, a man arrives, finds the computer chip from inside the T-800's arm, and sneakily hands it off to an underling, telling him to get it to their research and development department. As Sarah is shown leaving on a stretcher, the camera pulls back to show that the factory belongs to Cyberdyne Systems.
As any Terminator 2 fan knows, this event directly led to the creation of what would become apocalyptic hostile A.I. Skynet, as confirmed via dialogue by Cyberdyne scientist Miles Bennett Dyson. In this way, Sarah and Kyle themselves basically caused Skynet's creation, in the same time loop fashion in which Kyle managed to be sent back in time by John Connor to become John's own father. As for why these alternate ending scenes were cut, Cameron reveals in his audio commentary that he came to believe the scene wasn't necessary for people to pick up on the implication of what happened, and that it interfered with The Terminator's conclusion being about Sarah Connor's emotional journey. Sure enough, according to Cameron, when Terminator 2 was announced, people quickly started guessing that the T-800's arm being left behind in the hydraulic press would factor into the sequel's story.