Apple has well and truly jacked this whole Java thing up beyond belief, so you are not alone in your confusion.
First we had Java 6 provided by Apple. That provided the ability to run local Java apps like Crashplan etc. and also provided a web plugin. Then Java 7 cam along and replaced the Java web plugin with the Java 7 version.
So what you have now on a default install is Java 6 will install the first time you run a local app that needs it, then the Oracle updates provide Java 7 for the web plugin part of all this.
http://www.java.com/en/download/installed.jsp
Go the above link to make sure you have the latest Java 7 version.
The short answer is they coexist and are for different purposes.