What is the difference between steel string and nylon string used for acoustic guitars? Which is better?
Terminology: acoustic guitars are generally hollow bodied. So-called classical guitars will always have the bridge attached to the body, and that's where the strings will end. Other acoustic guitars will have either the same arrangement, or a tailpiece which moves the tension of the strings to the part of the body where there's usually a knob for a strap.
Nylon strings are mostly found on classical guitars, although some players prefer them, and use them on other acoustic guitars. They are thicker, but have less tension, slightly, than steel strings, and sound smoother, less jangly.
Steel (and phosphor bronze and other similar metallic) strings are usual on so-called acoustic guitars, being tighter and brighter, as well as thinner.
As far as better is concerned, it rather depends what style is being played, and what a player prefers. For strumming, metal strings will be the usual choice, but, as said previously, for 'proper' classical playing, nylon wins every time.
Classical guitars, which use nylon strings have softer and warmer sound. Acoustic guitars, which use steel strings have more twangy and bright sound that lasts long (resonates) than a classical guitar.
Cannot say which is better because its depends on the style you play. If you like to play classical music, finger picking, Flamenco or Spanish guitar, classical guitar is preferred. For more Rock N’ Roll type band music, its best to use an acoustic guitar.