Since strings are objects and since all objects in Java are always stored only in the heap space, all strings are stored in the heap space. However, Java keeps strings created without using the new keyword in a special area of the heap space, which is called "string pool". Java keeps the strings created using the new keyword in the regular heap space.
The purpose of the string pool is to maintain a set of unique strings. Any time you create a new string without using the new keyword, Java checks whether the same string already exists in the string pool. If it does, Java returns a reference to the same String object and if it does not, Java creates a new String object in the string pool and returns its reference. So, for example, if you use the string "hello" twice in your code as shown below, you will get a reference to the same string. We can actually test this theory out by comparing two different reference variables using the == operator as shown in the following code:
String str1 = "hello";
String str2 = "hello";
System.out.println(str1 == str2); //prints true
String str3 = new String("hello");
String str4 = new String("hello");
System.out.println(str1 == str3); //prints false
System.out.println(str3 == str4); //prints false
== operator is simply checks whether two references point to the same object or not and returns true if they do. In the above code, str2 gets the reference to the same String object which was created earlier. However, str3 and str4 get references to two entirely different String objects. That is why str1 == str2 returns true but str1 == str3 and str3 == str4 return false . In fact, when you do new String("hello"); two String objects are created instead of just one if this is the first time the string "hello" is used in the anywhere in program - one in the string pool because of the use of a quoted string, and one in the regular heap space because of the use of new keyword.
String pooling is Java's way of saving program memory by avoiding the creation of multiple String objects containing the same value. It is possible to get a string from the string pool for a string created using the new keyword by using String's intern method. It is called "interning" of string objects. For example,
String str1 = "hello";
String str2 = new String("hello");
String str3 = str2.intern(); //get an interned string obj
System.out.println(str1 == str2); //prints false
System.out.println(str1 == str3); //prints true