As far as I know GC is used only when JVM needs more memory, but I'm not sure about it. So, please, someone suggest an answer to this question.
The garbage collection algorithm of Java is as I understand, pretty complex and not as straightforward. Also, there is more than algorithm available for GC, which can be chosen at VM launchtime with an argument passed to the JVM.
There's a FAQ about garbage collection here: http://www.oracle.com/technetwork/java/faq-140837.html
Oracle has also published an article "Tuning Garbage Collection with the 5.0 Java[tm] Virtual Machine" which contains deep insights into garbage collection, and will probably help you understand the matter better: http://www.oracle.com/technetwork/java/gc-tuning-5-138395.html
The JVM and java specs don't say anything about when garbage collection occurs, so its entirely up to the JVM implementors what policies they wish to use. Each JVM should probably have some documention about how it handles GC.
In general though, most JVMs will trigger GC when a memory allocation pushes the total amount of allocated memory above some threshold. There may be mulitple levels of gc (full vs partial/generational) that occur at different thresholds.
In the older days garbage collector were empirical in nature. At some set interval or based on certain condition they would kick in and examine each of the object.
Modern days collectors are smarter in the sense that they differentiate based on the fact that objects are different lifespan. The objects are differentiated between young generation objects and tenured generation objects.
Memory is managed in pools according to generation. Whenever the young generation memory pool is filled, a minor collection happens. The surviving objects are moved to tenured generation memory pool. When the tenured generation memory pool gets filled a major collection happens. A third generation is kept which is known as permanent generation and may contain objects defining classes and methods.
Garbage Collection is deliberately vaguely described in the Java Language Specification, to give the JVM implementors best working conditions to provide good garbage collectors.
Hence garbage collectors and their behaviour are extremely vendor dependent.
The simplest but least fun is the one that stops the whole program when needing to clean. Others are more sophisticated and run quietly along your program cleaning up as you go more or less aggressively.
The most fun way to investigate garbage collection is to run jvisualvm in the Sun 6 JDK. It allows you to see many, many internal things many relevant to garbage collection.
https://visualvm.dev.java.net/monitor_tab.html (but the newest version has plenty more)
When unused heap memory (not referenced) is over defined parameter it free memory.
You can read about internals on slides in prelection http://beta.parleys.com/#id=1258&st=5&sl=5