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Why install Java separately in a browser?

I am trying to understand why we need to install Java within a browser despite having a JDK/JRE installed on the desktop.
When a browser prompts us to install Java , are we actually installing a separate (may be a more condensed version of) JRE ? How is this different from JRE that is installed on the desktop ?
Does the java installed in a browser interact with the one installed on the desktop ?
Say for instance , my web page is running applets. I need to run the applets (bytecodes) on a JVM right ? Why can't the browser just run this on the jre installed on the desktop ?
Can some one help me understand this better ?

Browser can't access JVM installed on that machine/host. It's mainly due to security reason. If it's allowed, just think what not we will be able to do through applications running in your browser. It will create plethora of security problems. Designers have intentionally put this restriction.
To execute applets and some other programs you need a separate JRE/Java for your browser.
And similarly, your host can't use Java installed in browser.

Issues with Java 7u65

Last night a new Java 7 update has been released: 7u65. I have a web application where a service applet is loaded, and after the update, my tests on different PCs did not show issues nor wrong behaviors.
Later, I started to receive issue reports related to my product's Java service applet. All the reports came from users who updated Java JRE to 7u65 (from 7u60):
The applet was not loading at all. I display a "Loading" screen when the application starts, and this was not being displayed. Also, all the services provided by my Java applet were unavailable.
After changing the Java Control Panel's advanced configuration to always show the console (in one of the PCs where this issue happened), I discovered that the applet was not even launching the Java console.
Using the same station where the error happens, trying to access java.com to check the current java version, the Java applet is loaded and the console is displayed without errors.
All tests were performed after clearing Browser and Java Cache, and even after removing the installed certificates (mine is a valid signed applet).
I checked the Java 7u65 release notes and none of the mentioned changes seem to affect my applet. Also, there were no issues while using Java 7u60.
I don't have any clues about what is going on, perhaps because the java update was released hours ago. As the Java console can not be displayed even if I configure Java Control Panel to do so, I can not tell if there is any exception. I can not reproduce the issue in my PCs (Windows 8, nor Windows 7, both at 64 bits), but the issue has been reported on Windows 7 PCs.
One of my friends told me that this seems to be happening on machines where Java 7u60 was in use, and then it was updated to Java 7u65 with no deinstallations. Also, this tends to happen in older OS (ie: WinXP) which is more natural.
I write this question because it seems very odd that some PCs have this issue, and some others not. I'd like to know if any one else is having this issue, knows what could be the reason, or has discovered/applied any solution to it. Also, I'd like to share the solution if I ever happen to find it.
Thanks.
Edit:
External references, related to the same Java version (JRE).
Internet Explorer crashing after updated Java to 7u65: An issue with the same JRE version, this time with Internet Explorer and Firefox.
RS Loading Issue (Java) ~ READ: An issue related to the same JRE version update, this time, in a Java Game.
The future of Java on Windows XP:
This end of support announcement has been misread as "Java no longer works on Windows XP" or "Oracle will stop Java updates from being applied on Windows XP". These statements are not correct.

I just ran into this exact problem with one of my applets.
It looks like some changes were made to the handling of the 'java-vm-args' and 'java_arguments' params in 7u65.
'java_arguments' seems to no longer work, when it is specified, my applet will silently fail without even launching the JVM.

I have had the same problem.
I delete C:\Users\${USER}\AppData\LocalLow\Sun
When i reloaded the web page containg the appelets. The JRE recreated this folder again.
And evrything was OK.
There is no big difference between the folders contents .. but it worked.
It seems to be a bug in the jRE

It seems that oracle has changed something with processing default plugin java arguments,
that caused problem in new java.
When upgrading from older version of java it is possible that value for
deployment.javaws.jre.0.args (or deployment.javaws.jre.1.args)
is not defined in
C:\Users\${USER}\AppData\LocalLow\Sun\Java\Deployment\deployment.properties
If you add
deployment.javaws.jre.0.args=
to deployment.properties, applet will work.
It can be done through Java Control panel also:
Java -> View -> double click on Runtime Parameters cell for java 7u65 to enter edit mode -> OK -> Apply
java-jvm-args solution didn't work for me, applet was launched but arguments were ignored.

Oracle has released an update that resolves this specific issue via version 7u67
http://www.oracle.com/technetwork/java/javase/7u67-relnotes-2251330.html

As Miloš Ratković wrote, if customer hasn't string in deployment.properties
deployment.javaws.jre.X.args=
where x is number of java installation for version 7_65 (number of java installation for particular version is X in string deployment.javaws.jre.X.product=1.7.0_65), Java applet failed to start.
For my case I have a solution - don't pass any arguments for my applet.
In my javascript code for starting applet I'm just comment
<param name="java_arguments" value="some arguments">
string
Also, if you delete the directory C:\Users\${USER}\AppData\LocalLow\Sun, during next startup of java applet java write new deployment.properties with correct java args string

Uninstall java 7 update 65 and reinstall java 7 update 55 Download the windows x86 offline version
Go to Java control panel and uncheck: automatic update
When the next window comes up, click on "do not check"
then click on "apply" and "ok"
close all browsers and reopen them to continue your work
This has worked for me every time so far and I have been doing this for the last two weeks now with "0" issues.

Sorry, this is not the answer. I was trying to verify the feedback about JRE 7u65 not able to accept "java_arguments"; however, I setup a Windows x32 and installed (new) 7u65 without upgrade from any older version. With the "java_arguments", the machine is able to load the applet in IE8 and FF30, when few specific PCs do fail the same applet with upgraded u65.

Mac OS Java 7 applet+smartcard issue

We have applet that uses smartcards to sign something. Everything was OK until new java update on Mac OS.
I'll explain. When macos had java 6 and special plugin for it, everything worked. But now they removed their plugin, and users must download browser-plugin for java 7 from Oracle web site.
Applet still sees Card Reader but doesn't see smartcard in it.
We use reader.isCardPresent() method, and it returns "false", no exceptions etc. like everything ok and there is no card in cardreader. We restore backup of the os, when there was 6 java and MacOS's own plugin, everything works. But we have many clients that have just bought new iMac or MacBook, they cannot use 6 java and apple's plugin.
Everything works on Windows.
We don't use any deprecated methods. Seems like problem with Oracle's plugin for Mac OS.
Anyone had similar problem or may be you have any ideas.

I just make some tests: take code from sample and slightly modify it. Run the sample on jdk1.7.0_09 in macosx 10.8.2. Pcsc framework 1.4.0.
terminal.isCardPresent() return false, but card can be accessed. Bug exist when java running both 32 and 64 bit mode. Pcscd running in 32 bit mode only, because generic pcsc driver is still 32-bit only.
In pcscd debug log i see some parsing errors in SHMMessageReceive, so bug may be in java or in the pcsc framework (winscard_msg.cpp).

Java applications with Windows 7 - are there compatibility concerns?

with some fuzz around Windows 7, does somebody have experiences with Java compatibility with Windows 7? Should this be a concern or do the programs probably work ok?
I'd be especially interested if somebody has experiences with Swing applications?
The versions available seem to be beta versions so they won't provide perfect basis for evaluation but some.
br, Touko

Updating info related to the question:
According to Supported System Configurations for Java SE 6 and Java For Business 6
,
Windows 7 support was introduced in 1.6.0_14
From Java SE 6 Update 14 Release Notes changes:
6821003 hotspot runtime_system Update hotspot windows os_win32 for windows 7
From Java SE 6 Update 18 Release Notes:
For 6u18, support has been added for the following system configurations:
* Windows 7 support is now available

I have been using various Java apps on my Win 7 x64 box just fine and never had any problems. Even some of my oldt poorly coded swing apps have worked without issues.
For the most part, Win 7 is Vista in new clothing. Shouldn't have much issues because of that.

Your biggest concern is having the right Java runtime installed. WHen that is out of the way you can expect properly written Swing programs to work identically.
(With proper I refer to not having hardcoded button sizes or similar)

There are several problem of swing application in windows7 there are stated below:
JCheckBoxMenuItem will not show image
JCheckBoxMenuItem(Icon,Text,boolean);//Icon will not displayed
you can refer the http://bugs.sun.com/bugdatabase/view_bug.do?bug_id=7122141.
Focus issues. Sometimes escape won't work

The problem I have with my Swing application on Windows 7 (and presumably Vista - haven't tried it), is that the Java Runtime indicates to Windows that it is UAC-aware, while my application that runs in the JVM actually isn't. As a result, if someone installs it into the traditional location (e.g. C:\Program Files\MyApp), the application fails because it cannot write configuration data or error log files to its installation directory. Because I use some third-party libraries that write their own files to the current (i.e. install) directory, and I've got many more important things to do than dig into those libraries just to make their error reporting and configuration storage UAC-aware, I took the path of least resistance and changed my default install directory to C:\MyApp. I realize that this is a regression back to the old DOS days where people ended up with myriad application directories in C:\, but it's not my fault that Windows' method of implementing UAC Virtualization for legacy applications doesn't work for Java apps.

Java Applet crashes .NET Webbrowsercontrol

in our application we have a Java applet running inside a .NET browser control. It is a know issue from Sun that running an applet this way may crash the control.
Has anyone come across the same problem and solved it?
Atm we are running the applet in a Webbrowser but we need to run it in a browser control.
Thx for any help.

After some time the problem solved itself.
It was indeed a bug in the java runtime which is now fixed by sun. Just make sure your JRE is > 1.6.10.

If you wrote the applet and have source, then you could try to migrate the Java Applet to a J# Browser control and stuff that in your .net application.
Here is a link - http://msdn.microsoft.com/en-us/library/aa290083(VS.71).aspx