This Java update is for BOTH 10.7 Lion and 10.8 Mountain Lion. There is a different Java updater for OS X 10.6 Snow Leopard.
The update provides Java 6, v1.6 Update 35. At this time, this is the ONLY safe version of Java for OS X. If you have Oracle's Java 7 installed, aka Java 1.7, you might as well uninstall it and instead install this update from Apple.
All other versions of Java currently have zero-day security holes that allow a malware rat to install infecting Java applets on a website that will drive-by infect Macs that visit the website. The infection requires NO user interaction at all. This is very much like a virus infection. Once a Mac is infected, the malware can bot/zombie the Mac and make it do anything the bot wrangler desires, including spewing spam, performing DDOS attacks, further infect other websites, download and install further malware, on and on.
This past spring Java drive-by infection malware botted 600,000 Macs. Not a typo. This is the single worst Mac malware infection in history. Java is currently the least secure third party software for Mac, even worse than Adobe's crapware.
The best approach regarding Java hereafter is to consider it dangerous when surfing the Internet. You can turn it OFF in your web browsers, depending upon whether you are at a website that requires Java or not. For general web browsing it is critical to keep Java OFF in case other drive-by security holes are discovered. You can also turn off Java entirely by using the Java Preferences app found in your Utilities folder. Just UNcheck its activity in the General tab.
Note that this particular set of security holes does NOT affect the use of non-Internet applications at all. There are no known Trojan horses for Mac exploiting Java security holes at this time, only Internet Java applets. Therefore, there is no problem using Java at this time except when surfing the Internet.
I hope that's helpful! I've written a couple articles about the current state of java at my Mac-Security blog: