Erik Pancakes said:

I mean, I thought Return of the Jedi established that Fett basically lived at Jabba's. Not that I ever much liked the idea, but what the hell else is he doing just chilling there in the movie?

Neither makes a whole lot of sense, but the idea of him chilling over at Jabba's hut seems much better than the alternative. I always figured he's getting paid to be there. A bodyguard, perhaps, albeit a really ineffectual one.

Naturally, the real explanation is that he was a meanie in ESB and thus needed to get defeated by a hero in RotJ, but no one bothered to think his inclusion through. That's shoddy RotJ scriptwriting for you.