So in America we don't have this. I get the impression it's the same effect as saying "Sir" or Ma'am. Like Yes sir! No Ma'am! And when I learned Spanish in school (forever ago) we had to learn it but they pretty much told us we'd probably never use it, that you can pretty much use the tu form and backburner the usted version. But I read that Germany 'pretty formal', so I'm thinking it's the opposite. Like use the formal you as your go-to version and only use the du type if someone tells you to? True? Opinions?
This is a simplified rule of thumb: Use the formal you with people you don't know and people you work with. Depending on the kind of workplace, how long you've worked with your colleages, whether you like them etc, you might use the informal you as well. The informal you is generally used to address friends, family and children (also other people's children). It's also used to address other young people (maybe under the age of 30) if you're roughly the same age and the conversation is taking place in a casual setting, for instance at a nightclub or a concert. University students always use the informal you amongst themselves. Also, people generally use the informal you on the Internet, with the exception being formal emails, for instance to your bank, clients, customer service etc.
Here's a good easy rule for native English speakers (at least after living in Germany for 5 years). Use "du" in cases where you would call someone by their first name ("John"), and "Sie" in cases where you would use their last name, i.e., "Dr./Mr./Mrs. Smith". Because almost no one uses the word "Sir" or "Madam" except in extremely formal circumstances, this is not a good comparison in the present day.
Also, this is not only about formal/informal circumstances - it also has a lot to do with status/respect. For instance, my neighbor of 2 years is a retired professor, but every time we see each other (I'm 30), we still only use Sie, even when he is in his bathrobe in the hallway! So sometimes relationships never progress to "Du".
Hope this helps.
When you first meet someone you will probably use the formal 'Sie', but when you have got to know each other they may ask you "Darf ich Sie duzen?", which is them asking permission to use the informal 'du'. Or you could ask yourself. Hope that's a helpful tip for someone.