It was faster. A page with JavaScript loaded instantly, a page with Java locked up the whole browser for around a minute while the JVM started. (That was probably also the start of the "Java is slow" meme: anyone who had ever visited a page with a Java applet immediately learned to associate "Java" with "slow".)
Applets suffered a spin up of the mini VM time. And applets couldn't affect the rendering of the html page, they had their own 'canvas'.
I rather think JS was more appropriate as dev found more use in dynamically altering the very html markup that users saw, and after it was actually rendered.
JS was definitely faster, but it wasn't really used it in a modern sense anyway - just simple animations.
MS definitely had a lot to do with Java applets failing though; after SUN fought to avoid being embraced/extinguished by VisualJ++, MS just pushed their own ActiveX tech to do the same thing, which was inevitably more performant (because it was based on COM+ and other Windows-specific innards).
I blame the failure of Java applets on Microsoft who deliberately undermined them.