Non-static vs Static Nested class

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A class can be defined within another class. These classes are known as nested classes. They allow you to logically group related classes in one place.

A non-static nested class has full access to enclosing class’s member variables. non-static nested class is called inner class.

According to Effective Java

Each instance of a non-static nested class is implicitly associated with an enclosing instance of its containing class… It is possible to invoke methods on the enclosing instance.

A static nested class does not have access to the nested class.

Non-static nested class

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class OuterClass {
    class NestedClass {
    }
}

To instantiate an inner class, you must first instantiate the outer class.

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OuterClass.InnerClass innerObj = outerObj.new InnerClass();

But inside the enclosing class, you don’t need the prefix

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NestedClass nc = new NestedClass();

Non-static nested class has access to the enclosing class.

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class OuterClass {
    public OuterClass() {
        NestedClass nc = new NestedClass()
    }
    public void foo() {
    }

    class NestedClass {
        public void bar() {
            OuterClass.this.foo();
        }
    }
}

Static nested class

there is no such thing as a static inner class. According to Effective Java, the correct terminology is a static nested class.

A static nested class interacts with the instance members of its outer class (and other classes) just like any other top-level class. In effect, a static nested class is behaviorally a top-level class that has been nested in another top-level class for packaging convenience.

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class OuterClass {
    static class NestedClass {
    }
}

You don’t need a outer class to create a static nested class. To instantiate a static nested class

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OuterClass.NestedClass in = new OuterClass.NestedClass();

If there is no need to directly create an instance of the nested class, you can use a static nested class. For example, LinkedList class has a static nested class Entry.

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public class LinkedList<E> ... {
...

 private static class Entry<E> { ... }

}

Reference