Terminal provides a command line, so, yes, you can use that. There are others, which are -IMHO- better (e.g. iTerm), but Terminal works just fine, so at the beginning
you should stick to it.
What that tells you is that all java executables (javac, java, jar, javadoc, ...) are installed and available. You can run "java -version" to find out which version of the JVM you have (on 10.3 it could be 1.3 or 1.4, on 10.4 it might 1.4 or 1.5/5.0).
Another interesting directory is /Library/Java/Extension, where you can place additional jar files so that they are available to all Java programs.
The javadocs are in /System/Library/Frameworks/JavaVM.framework/Versions/1.4.2/Resources/Documentation/Reference/doc/api on my machine. Depending on which JVM you have it might be in a slightly different directory on your machine.