This week's book giveaway is in the OCPJP forum. We're giving away four copies of OCA/OCP Java SE 7 Programmer I & II Study Guide and have Kathy Sierra & Bert Bates on-line! See this thread for details.
Yes, Selenium is a user-interface testing tool (I've started using it a bit in the last month). More generally, it does browser automation, but probably the main use of that is for testing. So I suspect the question was intended to be "can Selenium be used to test applets"?
Unfortunately I don't know the answer. A bit of searching suggests that out of the box, no, it can't. But http://docs.codehaus.org/display/FEST/Selenium suggests it might be possible integrate with other tools to get the job done.