1. Java in browsers. Perhaps the most important precaution against the latest Flashback trojans for those who cannot update Java (PPC Macs and Macs running on Leopard or older Mac OS X versions), but who still need Java functionality in their browsers to access and use certain web sites, is to disable Java in the browser's preferences during general web browsing. This will block the trojan's main infection vector by preventing Java applet execution.
When Java is needed, as for cross-platform functionality like that in certain secure banking sites etc., Java can be enabled for the duration. It would be prudent to make sure that your Mac is not infected with the trojan before you use such banking sites. It wouldn't hurt to verify with your bank if their site is still secure either.
2. Stand-alone Java apps. A secondary recommendation associated with protection against the Flashback trojans is to disable Java on your Mac entirely, using the Java Preferences utility installed in Utilities as part of a Java install. This will prevent local stand-alone Java (dependent) applications to run on your Mac. If you already disabled Java in your browser(s), however, this will not provide any added protection against the current Flashback trojan variants. That said, disabling Java instead of removing it has the advantage that you will still be able to quickly run any Java dependent software you may need, without having to reinstall Java from scratch.
While many users will not be discombobulated by disabling Java entirely, others could be. You can find out which Java dependent apps you have installed by Spotlight-searching for .jar, and checking which app any such file belongs to, using the path provided at the bottom of the Spotlight results window. It turns out that a surprising number of software titles is more or less Java dependent. The following non-exhaustive listing may help to get an idea. Please note that the presence of a particular item doesn't mean it is particularly important (or even current). It's just a set of examples, some of which you may recognize, particularly the ones in bold.
Adobe products such as Flash, Fireworks and Dreamweaver (GoLive) aMaze antlrworks Apache-Tomcat Apple Disk Transfer ProDOS Arachnophilia Art Of Illusion ATutor Barcode4J Birthday ClickRepair (and other Brian Davies audio utilities) CMS Made Simple CompileAndGo CrushFTP Cyberduck Databrid (installer) DataCrow DateStamp Batch Stamper Decrypto Duplicate Files Searcher Eclipse eCueCardsMac ekspos Electronics Optimizer Elite People Search Elite Video Downloader Encyclopedia Brittanica discs FilePhile FoundationStone Gallery GIFted Motion GlassFish Server GoToMeeting GraphicConverter Helma Home Credit Card Manager Home Loan Interest Manager HostMonitor iDiet ImageJ Install_MovieFinder [installers], various Interactive 3D Surface Plot IPMonitor iTunes Lyrics Locator iWisdom JaBack JAlbum JAME JarBundler JavaEmbeddingPlugin JJSplit Jmol JSubFixer KemetAPI Log Parser QL Mac FLV To Mp3 Converter Mare Internum Matrex MJPEG Lossless Rotate MM3-WebAssistant MoneyDance MRJ Adapter myPhoneDesktop Myster PR Nevitium Newton-II NM Collector JE Obba OpenDS OpenMocha OpenOffice (and other open source application suites) Osmose PageSucker Panther Sleek PDF OCR X PMan PowerFolder Professional Data Security PSCafePOS Puzzle Collection ReFactorIT Requiem Saphe ScenePainter Sophie Space Exploration Speech and Debate Timekeeper Stanza StarLogo StreamRipStar StreamTastic sudokumat SuperAnalyzer Timekeeper TiVo Transfer TurboTax 2010 U3 UnixExplorer [updaters], various VidMasta vSEC CMS U-Series Wamcom WebEdition CMS WebEx WebMin Wireless Link Test Xerver XMLSpear YouTube Downloader Zumocast