Is it good practice to use java.lang.String.intern()?

This has (almost) nothing to do with string comparison. String interning is intended for saving memory if you have many strings with the same content in you application. By using String.intern() the application will only have one instance in the long run and a side effect is that you can perform fast reference equality comparison instead of ordinary string comparison (but this is usually not advisable because it is realy easy to break by forgetting to intern only a single instance).

When would I use this function in favor to String.equals()

when you need speed since you can compare strings by reference (== is faster than equals)

Are there side effects not mentioned in the Javadoc?

The primary disadvantage is that you have to remember to make sure that you actually do intern() all of the strings that you're going to compare. It's easy to forget to intern() all strings and then you can get confusingly incorrect results. Also, for everyone's sake, please be sure to very clearly document that you're relying on the strings being internalized.

The second disadvantage if you decide to internalize strings is that the intern() method is relatively expensive. It has to manage the pool of unique strings so it does a fair bit of work (even if the string has already been internalized). So, be careful in your code design so that you e.g., intern() all appropriate strings on input so you don't have to worry about it anymore.

(from JGuru)

Third disadvantage (Java 7 or less only): interned Strings live in PermGen space, which is usually quite small; you may run into an OutOfMemoryError with plenty of free heap space.

(from Michael Borgwardt)

String.intern() is definitely garbage collected in modern JVMs.
The following NEVER runs out of memory, because of GC activity:

// java -cp . -Xmx128m UserOfIntern

public class UserOfIntern {
    public static void main(String[] args) {
        Random random = new Random();
        System.out.println(random.nextLong());
        while (true) {
            String s = String.valueOf(random.nextLong());
            s = s.intern();
        }
    }
}

See more (from me) on the myth of non GCed String.intern().

When would I use this function in favor to String.equals()

Given they do different things, probably never.

Interning strings for performance reasons so that you can compare them for reference equality is only going to be of benefit if you are holding references to the strings for a while - strings coming from user input or IO won't be interned.

That means in your application you receive input from an external source and process it into an object which has a semantic value - an identifier say - but that object has a type indistinguishable from the raw data, and has different rules as to how the programmer should use it.

It's almost always better to create a UserId type which is interned ( it's easy to create a thread-safe generic interning mechanism ) and acts like an open enum, than to overload the java.lang.String type with reference semantics if it happens to be a User ID.

That way you don't get confusion between whether or not a particular String has been interned, and you can encapsulate any additional behaviour you require in the open enum.

Am not aware of any advantages, and if there were in one would think that equals() would itself use intern() internally (which it doesn't).

Busting intern() myths

I would examine intern and ==-comparison instead of equals only in the case of equals-comparison being bottleneck in multiple comparisons of string. This is highly unlikely to help with small number of comparisons, because intern() is not free. After aggressively interning strings you will find calls to intern() getting slower and slower.

I would vote for it not being worth the maintenance hassle.

Most of the time, there will be no need, and no performance benefit, unless you're code does a lot of work with substrings. In which case the String class will use the original string plus an offset to save memory. If your code uses substrings a lot, then I suspect that it'll just cause your memory requirements to explode.