I'm not sure where you are getting your quote from but this is from the JLS:
8.1.2 Inner Classes and Enclosing Instances
An inner class is a nested class that is not explicitly or implicitly declared static. Inner classes may not declare static initializers (�8.7) or member interfaces. Inner
classes may not declare static members, unless they are compile-time constant fields (�15.28).
and
Inner classes may inherit static members that are not compile-time constants even though they may not declare them. Nested classes that are not inner classes may
declare static members freely, in accordance with the usual rules of the Java programming language. Member interfaces (�8.5) are always implicitly static so they are
never considered to be inner classes.
Inner classes are related to instances of the outer class, and therefore can't declare static things because static code must relate to the whole class.
Static inner classes (aka nested top level classes) CAN declare static stuff.
bindu, I think you must have mis-quoted something

[This message has been edited by Cindy Glass (edited March 21, 2001).]