Google has posted version 1.3.1 of the AppEngine for Java SDK.
App Engine uses the Java Servlet standard for web applications. You provide your app's servlet classes, JavaServer Pages (JSPs), static files and data files, along with the deployment descriptor (the web.xml file) and other configuration files, in a standard WAR directory structure. App Engine serves requests by invoking servlets according to the deployment descriptor.
The JVM runs in a secured "sandbox" environment to isolate your application for service and security. The sandbox ensures that apps can only perform actions that do not interfere with the performance and scalability of other apps. For instance, an app cannot spawn threads, write data to the local file system or make arbitrary network connections. An app also cannot use JNI or other native code. The JVM can execute any Java bytecode that operates within the sandbox restrictions.