Java has had a serious set of security flaws for several months that allow malicious code to install malware and infect your computer without your consent. What can you do? Simple, Oracle released update Java 7 Update 7 yesterday that patches this exploit, dubbed a Zero Hour exploit, one that was discovered after the vulnerable version of Java was released and can be taken advantage of anytime until it is patched.
You can patch this exploit by going to http://www.java.com/en/ and clicking the red Free Java Download button.
Java runs small programs called scripts and applets from websites, making your web browsing experience richer and more interactive. It also can increase risk to infection. For more general information on plugins, see this article.