JRE 1.7.0_51, Windows 7, Error "Your security settings have blocked a self-signed application from running"

Operating System version: Windows 7 Professional, Service Pack 1
Internet Explorer version: 8
Two versions of JRE's installed in the system:
1. Earlier "1.6.0_71" version was present.
2. Now, due to system security updates, "1.7.0_51" version was installed.

When i try to launch forms applet from e-Business Suite home page, it gives me a pop up:

On clicking on "OK", it gives me another pop up message and does not launch forms applet:

Note: Please note that Location has been edited for security purpose and has been replaced with dummy location "http://xyz:xx.yy.local:8000".

We can use a small workaround to resolve this.

Go to Control Panel ==> Java

Go to Security tab

There is a option "Edit Site List", just click on this option and add your URL, like in our example, it should be "http://xyz:xx.yy.local:8000".

Note: While Adding new value for site under exception site list, make sure that URL is valid, otherwise you won't be allowed to save the value. You cannot save any random/invalid value here.

Hope same workaround works for you also.