System Explorer is just how Obsidian refers to Finder (macOS) and Explorer (Windows). (Not sure what it is on Linux distros.) File Explorer is how Obsidian refers to the in-vault view.
So, “Reveal in System Explorer” would show a file in Finder, and “Reveal in File Explorer” would show where the file is in your Obsidian vault.
There’s been lots of debate on the terminology but I think the devs are fixed on this approach. (I would prefer a conditional “if macOS, call this Finder; if Windows, call this Explorer” approach, but alas!)