PolyString is an unusual kind of animal. It is a built-in data type for polymorphic string. This string maintains extra values in addition to its original value. The extra values are derived from the original value automatically using a normalization code.
It is currently used to support national characters in strings. The PolyString contains both the original value (with national characters) and normalized value (without national characters). This can be used in expressions e.g. to generate username that does not contain national characters or is a transliteration of the national characters. It deprecates the need to use custom conversion routines and each expression and therefore it brings some consistency into the integration code. But the most important reason is data storage. All the values are stored in the repository therefore they can be used to look for the object. Search that ignores the difference in diacritics or search by transliterated value can be used even if the repository itself does not support that feature explicitly.
Even though PolyString is a native part of midPoint since midPoint 2.0, it stil does not have its full potential (midPoint 3.x). But even the basic PolyString capabilities that we currently have make the system more useful. In case that you are interested in sponsoring completion of this feature, please use the influence that comes with midPoint subscription.