Yes, it just installs the Java security update after checking for and removing any malware if you have it. You need not do anything more at this point assuming you are using Lion.
The removal tool will only work if you DO NOT already have Java installed on your Lion system.
This information is from one of our resident experts, Tom Reed:
"There are three available updates, each one specific to a particular subset of users (with no overlap):
1) Java for OS X Lion 2012-003, available only for users of Lion with Java installed
2) Flashback malware removal tool, available only for users of Lion without Java installed
3) Java for Mac OS X 10.6 Update 8, available only for users of Snow Leopard
You install whichever of these shows up in Software Update, and it removes the malware (if present), updates Java (if present) and tightens up Java settings for the future. You could certainly download from Apple's web site as well, instead of using Software Update, but it's important you know which one to get, as the other two won't work for you."