Module Set.M

M is meant to be used in combination with OCaml applicative functor types:

type string_set = Set.M(String).t

which stands for:

type string_set = (String.t, String.comparator_witness) Set.t

The point is that Set.M(String).t supports deriving, whereas the second syntax doesn't (because there is no such thing as, say, String.sexp_of_comparator_witness, instead you would want to pass the comparator directly).