In theory you can do it this way. The java.awt.Toolkit will tell you the size of a pixel, and the pixel dimensions of the screen. So, to draw a 1" circle, you'd use a diameter of 1.0 * tk.getScreenResolution(), a 2.5" circle is 2.5 * tk.getScreenResolution(), etc. Or you can use the GraphicsConfiguration.getNormalizingTransform() method which adjusts the resolution to a 'fixed' size.
Unfortunately both of these methods rely on the underlying system knowing (and telling you) the actual resolution of your screen. In practice this very rarely occurs. All sorts of things can affect the actual size of a pixel. The actual size and make of monitor is one, and some monitors even allow you to adjust the size of the image on the screen.
This article http://www.developer.com/java/other/print.php/626071 discusses this.
Printers are generally better at telling you their real resolution. If you absolutely must have a picture which is the correct size, send it there.
Acknowledgements to the various answers from which I synthesized this one.