If a class is located in a package, what do you need to change in the OS environment to be able to use it?

You need to add a directory or a jar file that contains the package directories to the CLASSPATH environment variable. Let's say a class Employee belongs to a package com.xyz.hr; and is located in the file c:\dev\com\xyz\hr\Employee.java. In this case, you'd need to add c:\dev to the variable CLASSPATH. If this class contains the method main(), you could test it from a command prompt window as follows:
c:\>java com.xyz.hr.Employee