Well... partially right... I'll explain a little more...
The JDK is the Java Developers Kit... it has all the stuff programmers need to write and compile Java programs. The JRE is the Java Runtime Environment... it is a subset of the JDK and it just provides a user a way to run Java programs. When you download newer versions of these ( 1.3/1.4 ) the Java 2 Plugin is also provided. The Java 2 Plug-In provides an interface that lets your browser call the JRE on your system when it encounters calls to the plugin in web pages.
OK... now we're clear on exactly what the JDK, JRE, and Java 2 Plug-In are, and we can proceed to how the plugin works. Normally, when a browser encounters an applet tag, it executes that code in a built-in JVM. When a browser has an old JVM ( or none at all, like some new versions of IE ) Java applets will not execute correctly in the browser. So, you use the plugin to point to your new JVM installed with the JRE or JDK. Unfortunately, you can't just use the applet tags in your HTML, because the browser knows that those call the JVM embedded in the browser. So, you have to make a call to the plug-in. This is pretty involved, so Sun provided the htmlconverter program. You just wwrite the applet tag like you normally would in the HTML page, then you run htmlconverter on it and it changes the applet call to a call to the plug-in.
( Out of breath...
)
Any more questions?
-Nate