When should I use setUserState in Joomla?

In short: it's not a big difference and you can use whatever feels right in the context. I would stick with JApplication/setUserState because I think the code is better self explanatory.

The actual difference:

Both methods will store the specified state in the session. JApplication/setUserState will in fact internally use JSession/set to store the state.

What JApplication/setUserState does differently is that it will store every key value pair in a JRegistry. So it is equal to:

$session = JFactory::getSession();$registry = $session->get('registry');$registry->set('myvar', $myvarvalue);

So what's the point of using a JRegistry? It's the pretty much the functionally provided JRegistryFormat. You can use it to both parse and format the state:

$session = JFactory::getSession();$registry = $session->get('registry');$json = $registry->toString('JSON');$xml = $registry->toString('XML');

It's also worth pointing out that using JApplication/setUserState your state will end up in the "default" namespace:

$app = JFactory::getApplication();$app->setUserState( 'myvar', $myvarvalue );// $_SESSION['default']['registry']->set('myvar', $myvarvalue)