Signing an applet basically gives it a certificate. The user decides whether to accept it. If no, it runs as a normal applet, if yes, it runs as a privileged applet like an application. Typically you would purchase certificates, but this is not necessary. You can self-sign. If the user knows and trusts you, he will click yes anyway.
Read this: http://java.sun.com/j2se/1.4.2/docs/guide/plugin/developer_guide/rsa_signing.html
Monika.