From my limited understanding the steam cycle offers two advantages.  It fills with warm water and then gradually heats it to hot allowing a stepped cleaning clycle where you can wash mixed stain loads such as blood and grease.    By injecting steam in this cycle it allows the fibers of the fabric to open up as well as loosens greasy and non-organic matter. 

In the sanitize cycle the machine fills with hot water and it is then heated by the internal heater to 155 or 151 degrees depending on where you read it.  This cycle holds the temperature for the required time to sanitize the load without bleach.  Two caviets: This cycle is very long (almost three hours) and should only be used on fabrics that can stand the high temperatures.  I have used it on bedding when the kid was sick. 

The Sanitize cycle in the dryer is High heat and runs a minimim of one hour to heat the fabric to kill the germs on the item(s).  I have used this cycle on stuffed animals that couldn't be washed.  I have also used the steam cycle to freshen stuffed animals or throw pillows that just need freshened. 

Note:

To receive NSF certification, The sani cycles were on three contaminants most commonly found in bedding, Staph, E-coli, H1N1, as well as allergan reduction of Cockroach matter, Canine Dander, and Birch pollen.