JODE is a java package containing a decompiler and an optimizer for java. This package is freely available under the GNU GPL. New: The bytecode package and the core decompiler is now under GNU Lesser General Public License, so you can integrate it in your project.
The decompiler reads in class files and produces something similar to the original java file. Of course this can't be perfect: There is no way to produce the comments or the names of local variables (except when compiled with debuging) and there are often more ways to write the same thing. However, JODE does its job quite well, so you should give it a try and start the applet Jode has support for all constructs of JDK-1.3 including inner and anonymous classes.

ProGuard is a free Java class file shrinker, optimizer, obfuscator, and preverifier. It detects and removes unused classes, fields, methods, and attributes. It optimizes bytecode and removes unused instructions. It renames the remaining classes, fields, and methods using short meaningless names. Finally, it preverifies the processed code for Java 6 or for Java Micro Edition.