In Java, using `String a = new String("test")` creates a new string instance, meaning that two strings initialized this way will not be the same object in memory, even if their values are equal. In contrast, `String b = "test"` references an interned string, where identical string literals point to the same instance, allowing for memory efficiency. Thus, `String a = "test";` and `String b = "test";` will result in both variables referencing the same object. It is generally recommended to use string literals for initialization to take advantage of this interning feature, which conserves memory. Overall, understanding these differences is crucial for effective string management in Java.