ArcEngine 10.1 needs Java to be installed and ArcEgine finds Java by registry keys (not by environmental variables like JAVA_HOME and PATH).
When ArcEngine does not found Java properly there are two different error messages in the console log after Synchronized with "xxx" Map
1 Loading jawt.dll failed. This is normal if java.version < 1.3. If java.version is > 1.4 and if this failure has occurred on Windows, please ensure that this program is started with a Java executable from a JDK/JRE install location on this computer. at com.esri.arcgis.interop.NativeObjRef.getJdk13WindowsHandleNative(Native Method)
2 Java HotSpot