How and where are Annotations used in Java?

There are mutiple applications for Java's annotations. First of all, they may used by the compiler (or compiler extensions). Consider for example the Override annotation:

class Foo {

    @Override public boolean equals(Object other) {
        return ...;
    }
}

This one is actually built into the Java JDK. The compiler will signal an error, if some method is tagged with it, which does not override a method inherited from a base class. This annotation may be helpful in order to avoid the common mistake, where you actually intend to override a method, but fail to do so, because the signature given in your method does not match the signature of the method being overridden:

class Foo {

    @Override public boolean equals(Foo other) {  // Compiler signals an error for this one
        return ...;
    }
}

As of JDK7, annotations are allowed on any type. This feature can now be used for compiler annotations such as NotNull, like in:

public void processSomething(@NotNull String text) {
    ...
}

which allows the compiler to warn you about improper/unchecked uses of variables and null values.

Another more advanced application for annotations involves reflection and annotation processing at run-time. This is (I think) what you had in mind when you speak of annotations as "replacement for XML based configuration". This is the kind of annotation processing used, for example, by various frameworks and JCP standards (persistence, dependency injection, you name it) in order to provide the necessary meta-data and configuration information.

Annotations are meta-meta-objects which can be used to describe other meta-objects. Meta-objects are classes, fields and methods. Asking an object for its meta-object (e.g. anObj.getClass() ) is called introspection. The introspection can go further and we can ask a meta-object what are its annotations (e.g. aClass.getAnnotations). Introspection and annotations belong to what is called reflection and meta-programming.

An annotation needs to be interpreted in one way or another to be useful. Annotations can be interpreted at development-time by the IDE or the compiler, or at run-time by a framework.

Annotation processing is a very powerful mechanism and can be used in a lot of different ways:

to describe constraints or usage of an element: e.g. @Deprecated, @Override, or @NotNull
to describe the "nature" of an element, e.g. @Entity, @TestCase, @WebService
to describe the behavior of an element: @Statefull, @Transaction
to describe how to process the element: @Column, @XmlElement

In all cases, an annotation is used to describe the element and clarify its meaning.

Prior to JDK5, information that is now expressed with annotations needed to be stored somewhere else, and XML files were frequently used. But it is more convenient to use annotations because they will belong to the Java code itself, and are hence much easier to manipulate than XML.

Usage of annotations:

Documentation, e.g. XDoclet
Compilation
IDE
Testing framework, e.g. JUnit
IoC container e.g. as Spring
Serialization, e.g. XML
Aspect-oriented programming (AOP), e.g. Spring AOP
Application servers, e.g. EJB container, Web Service
Object-relational mapping (ORM), e.g. Hibernate, JPA
and many more...

...have a look for instance at the project Lombok, which uses annotations to define how to generate equals or hashCode methods.

Annotations in Java, provide a mean to describe classes, fields and methods. Essentially, they are a form of metadata added to a Java source file, they can't affect the semantics of a program directly. However, annotations can be read at run-time using Reflection & this process is known as Introspection. Then it could be used to modify classes, fields or methods.

This feature, is often exploited by Libraries & SDKs (hibernate, JUnit, Spring Framework) to simplify or reduce the amount of code that a programmer would unless do in orer to work with these Libraries or SDKs.Therefore, it's fair to say Annotations and Reflection work hand-in hand in Java.

We also get to limit the availability of an annotation to either compile-time or runtime.Below is a simple example on creating a custom annotation

Driver.java

package io.hamzeen;

import java.lang.annotation.Annotation;

public class Driver {

    public static void main(String[] args) {
        Class<TestAlpha> obj = TestAlpha.class;
        if (obj.isAnnotationPresent(IssueInfo.class)) {

            Annotation annotation = obj.getAnnotation(IssueInfo.class);
            IssueInfo testerInfo = (IssueInfo) annotation;

            System.out.printf("%nType: %s", testerInfo.type());
            System.out.printf("%nReporter: %s", testerInfo.reporter());
            System.out.printf("%nCreated On: %s%n%n",
                    testerInfo.created());
        }
    }
}

TestAlpha.java

package io.hamzeen;

import io.hamzeen.IssueInfo;
import io.hamzeen.IssueInfo.Type;

@IssueInfo(type = Type.IMPROVEMENT, reporter = "Hamzeen. H.")
public class TestAlpha {

}

IssueInfo.java

package io.hamzeen;

import java.lang.annotation.ElementType;
import java.lang.annotation.Retention;
import java.lang.annotation.RetentionPolicy;
import java.lang.annotation.Target;

/**
 * @author Hamzeen. H.
 * @created 10/01/2015
 * 
 * IssueInfo annotation definition
 */
@Retention(RetentionPolicy.RUNTIME)
@Target(ElementType.TYPE)
public @interface IssueInfo {

    public enum Type {
        BUG, IMPROVEMENT, FEATURE
    }

    Type type() default Type.BUG;

    String reporter() default "Vimesh";

    String created() default "10/01/2015";
}

Annotations are a form of metadata (data about data) added to a Java source file. They are largely used by frameworks to simplify the integration of client code. A couple of real world examples off the top of my head:

JUnit 4 - you add the @Test annotation to each test method you want the JUnit runner to run. There are also additional annotations to do with setting up testing (like @Before and @BeforeClass). All these are processed by the JUnit runner, which runs the tests accordingly. You could say it's an replacement for XML configuration, but annotations are sometimes more powerful (they can use reflection, for example) and also they are closer to the code they are referencing to (the @Test annotation is right before the test method, so the purpose of that method is clear - serves as documentation as well). XML configuration on the other hand can be more complex and can include much more data than annotations can.
Terracotta - uses both annotations and XML configuration files. For example, the @Root annotation tells the Terracotta runtime that the annotated field is a root and its memory should be shared between VM instances. The XML configuration file is used to configure the server and tell it which classes to instrument.
Google Guice - an example would be the @Inject annotation, which when applied to a constructor makes the Guice runtime look for values for each parameter, based on the defined injectors. The @Inject annotation would be quite hard to replicate using XML configuration files, and its proximity to the constructor it references to is quite useful (imagine having to search to a huge XML file to find all the dependency injections you have set up).

Hopefully I've given you a flavour of how annotations are used in different frameworks.

How and where are Annotations used in Java?

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Java

Annotations

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