How Java checks that is out of date

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I have a linux box which is not connected to Internet. I have installed on it Firefox 24.0 and jre1.7.0_40 (and also 1.7.0_17) When I start FF with a web application locally installed on the box I'm getting a warning popup that

Java Update Needed; YourJava version is out of date

I don't undesrtand how Java knows that is 'out of date' ??? What compares to what ? I would assume that checks the available versions at oracle.com and if the current one installed on the system is too old then drops this warning.

Or the application itself which is started carries some information about Java version what was available or what was used at its compile time ??

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