The package reserved word in Java is used to specify that the class defined in this file belongs to the package specified after the package reserved word.

The collection of classes that is available to the programmer is called the Application Programming Interface or API. The Java API is divided into packages, where related classes belong to the same package. For example, all classes in the java.util package are utility classes that implement commonly needed functionality. This package is further divided into java.util.zip (for classes dealing with *.zip files) and java.util.logging (for classes dealing with logging messages during the execution of your program).

Book: 15.1, 15.2