Usage depends on whether the component's parent has a layout manager or not.
setSize() -- use when a parent layout manager does not exist;setPreferredSize() (also its related setMinimumSize and setMaximumSize) -- use when a parent layout manager exists.The setSize() method probably won't do anything if the component's parent is using a layout manager; the places this will typically have an effect would be on top-level components (JFrames and JWindows) and things that are inside of scrolled panes. You also must call setSize() if you've got components inside a parent without a layout manager.
Generally, setPreferredSize() will lay out the components as expected if a layout manager is present; most layout managers work by getting the preferred (as well as minimum and maximum) sizes of their components, then using setSize() and setLocation() to position those components according to the layout's rules.
For example, a BorderLayout tries to make the bounds of its "north" region equal to the preferred size of its north component---they may end up larger or smaller than that, depending on the size of the JFrame, the size of the other components in the layout, and so on.