String is utf8, OsString is not (necessarily). Having two separate types mean you can guarantee utf8 when you want to, but don't have to when you can't, such as

String is utf8, OsString is not (necessarily). Having two separate types mean you can guarantee utf8 when you want to, but don't have to when you can't, such as when dealing with “strings” that an OS produces, which are basically just sequences of bytes (perhaps with zero bytes disallowed). When you have one string type that has to do both jobs, you lose out on the guarantees of the more restrictive type.