I also think it's something to do with games or ads that have moving scenes. Whatever, I have never allowed a Java update (because I couldn't be bothered) and it hasn't affected my PC as yet!
I first downloaded Java a few years back when i began playing Quadplex Scrabble. Since then i have downloaded regular updates, but my internet security, Macafee, will not allow me to download the latest update. As a result, i can no longer play scrabble online:-( And yet i am able to carry on playing other games including curling which i have just discovered:-)
Java is a programming language developed by Sun Microsystems a few years ago. it was very much the fad years ago as it was platform-independent - able to run on different types of operating system. Unfortunately the java applet (effectively a computer program hosted by a website which you run on your own machine) which was supposed to be the great innovation, has never been able to be made wholly secure (although it's no different in that respect from other similar things like ActiveX).
You need java on your computer to run applets etc, and there's no harm downloading the latest version of the runtime from the Oracle website . However, as pointed out this is a bogus pop-up and should not be followed. In fact you should always ignore/kill any unexpected popup screen from anywhere.
I had the wretched thing 3 times while typing up a post the other day and had to keep starting again from scratch