I have a Java Applet inserted on a simple HTML page located at http://localhost:8080/index.html:
See: http://download.oracle.com/javase/tutorial/deployment/applet/security.html
Unsigned applets can perform the following operations:
They can make network connections to the host they came from.
If Java does not resolve the originating system to localhost then the applet will not be able to open sockets.