I read on Jython home page http://www.jython.org/Project/index.html  in the list of what Jython can do
This: Optional static compilation - allows creation of applets, servlets, beans, ...
Also in the book I'm reading: "Python Programming with the Java Class Libraries" by Richard Hightower" 
Clearly shows that the applet must be compiled.  This book was published in 2002, so it's probably outdated, but I couldn't find a more up to date reference regarding Jython applets.
ON the FAQ page of Jython.org says: "...However, as jythonc will not be included in Jython-2.3 its use is not recommended for the future."
This article: http://wiki.python.org/jython/JythonMonthly/Articles/October2006/3   gives compelling arguments for not using jythonc, but:
How would one go about creating a Jython applet, (written entirely in Jython) without jythonc?