Both tu and usted are used as the second person pronoun. However as everyone has mentioned, tu is a more informal, colloquial way of addressing someone. It is used mainly when talking to your family, children and very close friends. Usted is more formal, and is used when talking to complete strangers, elder people (as a sign of respect). However, it is also largely a cultural thng. I think someone mentioned that in some countries it is complicated by the use of a third form which is vos. That is true. I come from Colombia, and even among Colombians, people use tu, vos and usted differently. In Bogota, where I was born, the use of usted is largely extended. Men use usted to refer to everyone except when talking to women. And women prefer to use tu when talking among them, and to men of their own age. It is considered disrespectful to talk to someone using tu when you don't know them very well. The use of usted is so extensive that I even talk to my best friend as usted, because he is a man as well. And even sometimes when talking to my parents I use usted. That's because usted is very common in Bogota. In the Caribbean coast of Colombia, most people use tu always. And in Antioquia, people use the vos. In Bogota, we never use vos; we just don't grow up hearing it or using it. So as you see, there are no fixed rules, and it's in large part a cultural thing. I also suggest that when in doubt use usted. If the person you're talking to prefers tu, they won't be offended and may tell you to refer to them as tu. But if you're talking to someone as tu, when they don't like it (like me), it might offend them (not me, but I know some people who are). Hope it helps.
