C# – the purpose of the vshost.exe file

string is an alias in C# for System.String.
So technically, there is no difference. It's like int vs. System.Int32.

As far as guidelines, it's generally recommended to use string any time you're referring to an object.

e.g.

string place = "world";

Likewise, I think it's generally recommended to use String if you need to refer specifically to the class.

e.g.

string greet = String.Format("Hello {0}!", place);

This is the style that Microsoft tends to use in their examples.

It appears that the guidance in this area may have changed, as StyleCop now enforces the use of the C# specific aliases.

I've defined the following property as we use this often in unit testing.

public static string AssemblyDirectory
{
    get
    {
        string codeBase = Assembly.GetExecutingAssembly().CodeBase;
        UriBuilder uri = new UriBuilder(codeBase);
        string path = Uri.UnescapeDataString(uri.Path);
        return Path.GetDirectoryName(path);
    }
}

The Assembly.Location property sometimes gives you some funny results when using NUnit (where assemblies run from a temporary folder), so I prefer to use CodeBase which gives you the path in URI format, then UriBuild.UnescapeDataString removes the File:// at the beginning, and GetDirectoryName changes it to the normal windows format.