Is the latest version of Java, which is 1.7u17 downloaded from Oracle's site?
Note that there are MANY, MANY threads regarding Java issues here. See the "More like This" at the right of this thread, and just peruse some of the threads to find suggestions for resolving this.
There are many security issues with Java, and 10.8 has disabled it many times because of these risks (which are significant). You need to be on the absolute latest version or it won't work.