I have an application which has just one cab file containing class files in it and along with cab file 1 .osd file is present.
I googled and found some information that its a kind of packagewhich has to be deployed through internet explorer through servlets.
Has someone tried this?

This looks like a situation where capture might be of help. If you don't have a capture tool, then InCtrl5 can be downloaded from the net, and there are others such as WinInstall LE on the Win2K operating system install CD.
This will help identify where the files go and what registration operations take place.

msdn.microsoft.com/en-us/library/aa740950%28VS.85%29.aspx
www.w3.org/TR/NOTE-OSD

I found the first sentence of the MS article to be of most use...LOL

If you have no choice but use this archaic format, you could try lashing up an HTML page as per the examples shown, start a capture and open the page in IE. However, I think there should also be an INF file to go with the CAB...