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In java everything is reference, so when you have something like: Point pnt1 = new Point(0,0); Java does following:

1. Creates new Point object
2. Creates new Point reference and initialize that reference to point (refer to) on previously created Point object.
3. From here, through Point object life, you will access to that object through pnt1 reference. So we can say that in Java you manipulate object through its reference.
   

Java doesn't pass method arguments by reference; it passes them by value. I will use example from this site:

public static void tricky(Point arg1, Point arg2) {
  arg1.x = 100;
  arg1.y = 100;
  Point temp = arg1;
  arg1 = arg2;
  arg2 = temp;
}
public static void main(String [] args) {
  Point pnt1 = new Point(0,0);
  Point pnt2 = new Point(0,0);
  System.out.println("X1: " + pnt1.x + " Y1: " +pnt1.y); 
  System.out.println("X2: " + pnt2.x + " Y2: " +pnt2.y);
  System.out.println(" ");
  tricky(pnt1,pnt2);
  System.out.println("X1: " + pnt1.x + " Y1:" + pnt1.y); 
  System.out.println("X2: " + pnt2.x + " Y2: " +pnt2.y);  
}

Flow of the program:

Point pnt1 = new Point(0,0);
Point pnt2 = new Point(0,0);

Creating two different Point object with two different reference associated.

System.out.println("X1: " + pnt1.x + " Y1: " +pnt1.y); 
System.out.println("X2: " + pnt2.x + " Y2: " +pnt2.y);
System.out.println(" ");

As expected output will be:

X1: 0     Y1: 0
X2: 0     Y2: 0

On this line 'pass-by-value' goes into the play...

tricky(pnt1,pnt2);           public void tricky(Point arg1, Point arg2);

References pnt1 and pnt2 are passed by value to the tricky method, which means that now yours references pnt1 and pnt2 have their copies named arg1 and arg2.So pnt1 and arg1 points to the same object. (Same for the pnt2 and arg2)

In the tricky method:

 arg1.x = 100;
 arg1.y = 100;

Next in the tricky method

Point temp = arg1;
arg1 = arg2;
arg2 = temp;

Here, you first create new temp Point reference which will point on same place like arg1 reference. Then you move reference arg1 to point to the same place like arg2 reference. Finally arg2 will point to the same place like temp.

From here scope of tricky method is gone and you don't have access any more to the references: arg1, arg2, temp. But important note is that everything you do with these references when they are 'in life' will permanently affect object on which they are point to.

So after executing method tricky, when you return to main, you have this situation:

So now, completely execution of program will be:

X1: 0         Y1: 0
X2: 0         Y2: 0
X1: 100       Y1: 100
X2: 0         Y2: 0