In an announcement on developer.apple.com, Apple states that "As of the release of Java for Mac OS X 10.6 Update 3, the version of Java that is ported by Apple, and that ships with Mac OS X, is deprecated." It now seems likely that OS X 10.7 will not have a Java install built into the OS, although the current runtime will continue to be supported during the regular support cycles for Mac OS X 10.5 and 10.6.
This is not all that surprising. In the early days of OS X, Apple was keen on Java, supporting it as a full-fledged alternative to Objective C for application development. Over the years, though, its enthusiasm waned; we saw longer and longer gaps between updates and an official discontinuation of the Java-Cocoa bridge in 2006. Client-side Java on OS X has been effectively moribund for a long time now (with one standout exception in recent times). Update: commenter David Emery quite rightly points out that NeoOffice is significant too.
Server-side Java on OS X, however, is a small but non-zero market. Currently, Oracle (which acquired Java developer Sun in 2009) offers Java installations for Windows, Linux, and Solaris; it remains to be seen if it or one of the handful of third-parties offering JVMs (like IBM) will step up and ship an OS X version of their product. There are also open source implementations that flesh out the not-quite-complete OpenJDK distribution to make it fully usable and Java SE 6 compliant, like IcedTea; none of those yet exist as packages for Mac OS X, but that could certainly change.
Thanks to Hendrik Schreiber for sending this in.