The configuration for entity managers both inside an application server and in a standalone application reside in a persistence archive. A persistence archive is a JAR file which must define a persistence.xml file that resides in the META-INF folder. All properly annotated classes included in the archive (ie having an @Entity annotation), all annotated packages and all Hibernate hbm.xml files included in the archive will be added to the persistence unit configuration, so by default, your persistence.xml will be quite minimalist:

<persistence xmlns="http://java.sun.com/xml/ns/persistence"
   xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
   xsi:schemaLocation="http://java.sun.com/xml/ns/persistence http://java.sun.com/xml/ns/persistence/persistence_1_0.xsd"
   version="1.0">
   <persistence-unit name="sample">
      <jta-data-source>java:/DefaultDS</jta-data-source>
      <properties>
         <property name="hibernate.dialect" value="org.hibernate.dialect.HSQLDialect"/>
         <property name="hibernate.hbm2ddl.auto" value="create-drop"/>
      </properties>
   </persistence-unit>
</persistence>

Here's a more complete example of a persistence.xml file

<persistence xmlns="http://java.sun.com/xml/ns/persistence"
   xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
   xsi:schemaLocation="http://java.sun.com/xml/ns/persistence http://java.sun.com/xml/ns/persistence/persistence_1_0.xsd"
   version="1.0">
   <persistence-unit name="manager1" transaction-type="JTA">
      <provider>org.hibernate.ejb.HibernatePersistence</provider>
      <jta-data-source>java:/DefaultDS</jta-data-source>
      <mapping-file>ormap.xml</mapping-file>
      <jar-file>MyApp.jar</jar-file>
      <class>org.acme.Employee</class>
      <class>org.acme.Person</class>
      <class>org.acme.Address</class>
      <properties>
         <property name="hibernate.dialect" value="org.hibernate.dialect.HSQLDialect"/>
         <property name="hibernate.hbm2ddl.auto" value="create-drop"/>
      </properties>
   </persistence-unit>
</persistence>

Be sure to define the grammar definition in the persistence element since the EJB3 specification requires the schema validation. If the systemId ends with persistence_1_0.xsd, Hibernate entityManager will use the version embedded in the hibernate-entitymanager.jar. No internet access will be processed.

<persistence xmlns="http://java.sun.com/xml/ns/persistence"
   xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
   xsi:schemaLocation="http://java.sun.com/xml/ns/persistence http://java.sun.com/xml/ns/persistence/persistence_1_0.xsd"
   version="1.0">

The EJB3 specification defines a bootstrap procedure to access the EntityManagerFactory and the EntityManager. The bootstrap class is javax.persistence.Persistence, e.g.

EntityManagerFactory emf = Persistence.createEntityManagerFactory("manager1");
//or
Map configOverrides = new HashMap();
configOverrides.put("hibernate.hbm2ddl.auto", "create-drop");
EntityManagerFactory programmaticEmf =
    Persistence.createEntityManagerFactory("manager1", configOverrides);

The first version is equivalent to the second with an empty map. The map version is a set of overrides that will take precedence over any properties defined in your persistence.xml files. There are a couple of EJB3 properties usable in the map:

When Persistence.createEntityManagerFactory() is called, the persistence implementation will search your classpath for any META-INF/persistence.xml files using the ClassLoader.getResource("META-INF/persistence.xml") method. Actually the Persistence class will look at all the Persistence Providers available in the classpath and ask each of them if they are responsible for the creation of the entity manager factory manager1. Each provider, from this list of resources, it will try to find an entity manager that matches the name you specify in the command line with what is specified in the persistence.xml file (of course the provider element must match the current persistent provider). If no persistence.xml with the correct name are found or if the expected persistence provider is not found, a PersistenceException is raised.

Apart from Hibernate system-level settings, all the properties available in Hibernate can be set in properties element of the persistence.xml file or as an override in the map you pass to createEntityManagerFactory(). Please refer to the Hibernate reference documentation for a complete listing. There are however a couple of properties available in the EJB3 provider only.

Note that you can mix XML <class> declaration and hibernate.ejb.cfgfile usage in the same configuration. Be aware of the potential clashed. The properties set in persistence.xml will override the one in the defined hibernate.cfg.xml.

Here is a typical configuration in a J2SE environment

<persistence>
   <persistence-unit name="manager1" transaction-type="RESOURCE_LOCAL">
      <class>org.hibernate.ejb.test.Cat</class>
      <class>org.hibernate.ejb.test.Distributor</class>
      <class>org.hibernate.ejb.test.Item</class>
      <properties>
         <property name="hibernate.dialect" value="org.hibernate.dialect.HSQLDialect"/>
         <property name="hibernate.connection.driver_class" value="org.hsqldb.jdbcDriver"/>
         <property name="hibernate.connection.username" value="sa"/>
         <property name="hibernate.connection.password" value=""/>
         <property name="hibernate.connection.url" value="jdbc:hsqldb:."/>
         <property name="hibernate.max_fetch_depth" value="3"/>
       
         <!-- cache configuration -->
         <property name="hibernate.ejb.classcache.org.hibernate.ejb.test.Item" value="read-write"/>
         <property name="hibernate.ejb.collectioncache.org.hibernate.ejb.test.Item.distributors" value="read-write, RegionName"/>

         <!-- alternatively to <class> and <property> declarations, you can use a regular hibernate.cfg.xml file -->
         <!-- property name="hibernate.ejb.cfgfile" value="/org/hibernate/ejb/test/hibernate.cfg.xml"/ -->
      </properties>
   <persistence-unit>
</persistence>

To ease the programmatic configuration, Hibernate Entity Manager provide a proprietary API. This API is very similar to the Configuration API and share the same concepts: Ejb3Configuration. Refer to the JavaDoc and the Hibernate reference guide for more detailed informations on how to use it.

TODO: me more descriptive on some APIs like setDatasource()

Ejb3Configuration cfg = new Ejb3Configuration();
EntityManagerFactory emf = 
  cfg.configure("/mypath/hibernate.cfg.xml") //add a regular hibernate.cfg.xml
     .addProperties( properties ) //add some properties
     .setInterceptor( myInterceptorImpl ) // set an interceptor
     .addAnnotatedClass( MyAnnotatedClass.class ) //add a class to be mapped
     .addClass( NonAnnotatedClass.class ) //add an hbm.xml file using the Hibernate convention
     .addRerousce( "mypath/MyOtherCLass.hbm.xml ) //add an hbm.xml file
     .addRerousce( "mypath/orm.xml ) //add an EJB3 deployment descriptor
     .buildEntityManagerFactory(); //Create the entity manager factory