We can use drupal core pagination in our customized module using following steps:

function xyz(){

$limit = 10;

$query = "select fields from table";

$count = " select count(*) from table";

$result = pager_query($query,$limit,0,$count);

while($arr = db_fetch_array($result))
  {
         $dataArr[] = $arr;
  }

//function is defined in pager.inc

$pager = theme_pager($limit);

 $block_content = theme('tpl_name',$dataArr,$pager);
   return $block_content;

 }

//in theme funtion

'tpl_name' => array(
            'template' => 'tpl_name',
            'arguments' => array('dataArr'=>null,'pager'=>null),
            ),

//in tpl file write following line in last

<div> <?php echo $pager; ?> </div>

//Now pagination is quite simple