Judith Carr was born and grew up in Burbank, California, the daughter of a jazz trumpet player and an aspiring nurse. She was afflicted with both childhood arthritis and Crohn's disease and spent a sizable portion of her youth in the hospital or on bedrest. Graduating from Burbank High School in 1956 (where she was a straight-A student), she briefly attended Long Beach State College as an art major before relocating to Hayama, Japan, in 1961, with her then lover, a Navy Sailor. A brief marriage to him did not work out, ending in 1964, and she spent the next thirteen years in various occupations, including clerical worker, teaching assistant in kindergarten and high school, and English as a Second Language Teacher, and working as a radio Journalist in Finland.

In 1963, while living in Miami, Anderson was secretary to a Producer of "nudie" movies and a receptionist at the Burger King home office; she also worked for Avis during this period. In her website autobiography, she indicates that she appeared in an (unnamed) sexploitation film in 1963, portraying a police sergeant.

After a further period overseas, Anderson returned to the United States in 1977, and became involved in the pornography Business in 1978 while trying to get into documentary film making. She was working in advertising when she answered an ad by hardcore pornography Producer Alex de Renzy, who was looking for an Actress. Her career took off after she was cast in the movie Pretty Peaches. She acquired the name of "Aunt Peg" during a clip in the Swedish Erotica series, where she was portrayed as having sex with a niece, who cried out: "Oh, Aunt Peg!"; thus arose the moniker by which Anderson is best known to her fans.

In 1985, Anderson chose to leave the adult film Business after signing over distribution rights for the film Educating Nina, a video she directed, produced and funded with money she raised from various donors, which featured the debut of Future porn superstar Nina Hartley. She never received any income for the film, and all the investors' money was lost. Juliet moved to Placerville, California, where she worked in a bed and breakfast, cleaned houses and did child care and elder care, continued to do some live stage shows, and opened a massage therapy office. Anderson chose to return to pornography in 1995, making new movies as an Actress, Producer and Director.

In 1998, she directed and produced Ageless Desire, a hardcore video featuring several over-50 real-life couples, including Juliet and her partner at the time. Numerous awards followed: Induction into the Erotic Legends Hall of Fame in 1996, an X-rated Critics Organization Hall of Fame Award in 1999, and a "Lifetime Achievement Actress Award" from the Free Speech Coalition in 2001. In 2007, Anderson received an honorary Doctor of the Arts from The Institute for Advanced Study of Human Sexuality. She was featured in the 1998 documentary Wadd: The Life & Times of John C. Holmes and also made one of her last appearances in Dick Ho: Asian Male Porn Star in 2005.

By 2009, Anderson lived in Berkeley, California with four cats. Although no longer working in the adult film industry, she had announced plans to produce new films. She also worked as a relationship counselor, giving private workshops for couples focusing on "Tender Loving Touch", in which sexual touching is seen as "the play, not foreplay." She contributed to the books The New Sexual Healers: Women of the Light and The Red Thread of Passion, and authored articles for magazines and newspapers.

On the morning of January 11, 2010, a friend discovered Anderson's body. The friend stated that he had arrived at Anderson's residence to take her to a doctor's appointment for a colonoscopy, to help her with the treatment of Crohn's Disease. He further reported that he found Anderson in her bed, with nothing in the room appearing to be "out of the ordinary." He stated that Anderson had expressed a Desire to be cremated. A memorial was held on January 26, 2010 at the Center for Sex and Culture in San Francisco.

Although Anderson portrayed many characters during her movie career, all tended to be tough-talking and unsentimental, yet rambunctious, vibrant and even comedic—all at the same time. She was said never to have faked an orgasm in any of her films. Author Charles Taylor wrote that she "brought a persona of classic movie-broad to porn", referring to her as "the Joan Blondell of porn." Another critic, Howard Hampton, opined that "her tough, no-nonsense older woman routine would be at home in the margins of any Howard Hawks movie."