Can a java file have more than one class?

Yes, as many as you want!

BUT, only one "public" class in every file.

Yes, it can. However, there can only be one public top-level class per .java file, and public top-level classes must have the same name as the source file.

The purpose of including multiple classes in one source file is to bundle related support functionality (internal data structures, support classes, etc) together with the main public class. Note that it is always OK not to do this--the only effect is on the readability (or not) of your code.

If you want to implement a public class, you must implement it in a file with the same name as that class. A single file can contain one public and optionally some private classes. This is useful if the classes are only used internally by the public class. Additionally the public class can also contain inner classes.

Although it is fine to have one or more private classes in a single source file, I would say that is more readable to use inner and anonymous classes instead. For example one can use an anonymous class to define a Comparator class inside a public class:

  public static Comparator MyComparator = new Comparator() {
    public int compare(Object obj, Object anotherObj) {

    }
  };

The Comparator class will normally require a separate file in order to be public. This way it is bundled with the class that uses it.