I don't understand why that is so difficult to get. English and german both have exactly the same two levels of formality. You can adress ppl. formally (Mr., Mrs, Herr, Frau) and informally (using first names). When you use Mr. and Mrs. you use "Sie" in german. When you use first names you use "du".
Not quite sure about the people/thing disctinction. E.g., "Do you know this car?" would be Kennen Sie dieses Auto?. I'd rather say you use kennen with the meaning of having met.../having seen... before/having made the acquaintance of... whereas wissen implies you know how something works or is to be done.
Yes you do. There are two levels of formality in both english and german. You can adress people formally using Mr. and Mrs. and informally using first names. When you would use Mr. and Mrs. ind english you use "Sie" in german. When you use first names in english you use "Du" in german.
German distinguishes between informal and formal "you".
When you are speaking to a child, a relative, or a close friend, you call them du (accusative case: dich.)
When you are speaking to several children, relatives, or friends, you call them ihr (accusative case: euch.)
But when you are speaking to an adult who is not a close friend or relative, you use the polite pronoun Sie (accusative case is also Sie). This polite pronoun is always capitalised, and it's used whether you speak to one person or to several at once.
The pronoun "she/her" is also sie but is not capitalised. Similarly with the pronoun "they/them".
Why sie and not ihr or inhen?
Because you need the accusative case -- Ihnen would be dative (and ihr would dative for "her" rather than "you").
Remember that in German, only masculine words have a separate form for the accusative case: feminine, neuter, and plural words always look the same in the nominative and accusative. So "you" (formal, accusative) is Sie, because Sie acts just like sie ("they") which is plural.