Java handles memory management differently for static and instance variables. Static variables are stored in the method area and belong to the class, meaning they are shared among all instances. They are loaded into memory only once when the class is first loaded. In contrast, instance variables are stored in the heap and are unique to each object, getting created each time an object is instantiated. This clear separation helps Java manage memory efficiently and reduces redundancy. Understanding this distinction is vital for writing optimized programs. Master these core concepts with a professional java certification course.