What is the difference between the two?
When should “set scene” be used, and when should “start game from file” be used?
I am not an expert. . . well who am I kidding 
The “Set Scene” switches the scene or level in 1 blender file. “Start Game from File” goes ito a whole different blender file to play from. Anyone correct me if I am wrong, but I think thats accurate. Hope that helps.
I can see how that works, but can’t you just link scenes from other files and then use “set scene”? So I’m not sure why it’s really there.
I didn’t think you could link it like that. . .
Set Scene uses internal scenes. These could be scenes that are made in the blend file, or are linked.
Start game from file uses another blend file, and clears from memory most of the stuff from the current blend file.
Yes, they can duplicate uses, but say I have a menu, which may have 7 or 8 scenes, and maybe 12 levels, add on the in-game menu’s (another 5 or so scenes) then you have a list of scenes a zillion long. It is much easier to make complex games by splitting up the blends.
Using set scene, you can have multiple levels which share the same .blend file. These will all share the same resource (.blend file), which IMO is better since you only have 1 long loading time at launch. But some people prefer multiple blend files because of low ram usage (better performance for slow computers). Correct me if I am wrong, but this is what I have been told.