String

String is an item primarily received by killing Spiders, which drop 0-2 units on death. String can also be found (rarely) in dungeon chests, but because dungeons tend to be hard to find, this is not a very good method of obtaining it.

Five pieces of string are enough to create a single Bow and Fishing Rod. After obtaining those, the only real reason to collect more string is to make Dispensers, which require one bow each to craft. Though string can be used to make Wool, that resource is more readily harvested directly from Sheep.

Crafting
The only use of string is for crafting. It can be used to make Bows, Fishing Rods, and Wool.