Blurry battle lines: du oder Sie?

I experienced a conversation in my class this week that left me with many questions. Sitting in a grammar course during the summer is interesting in itself. Some of the topics that are discussed in class can really open your eyes and make you ponder about your habits with other people. It is one thing to talk to yourself (which we all do-it is okay) in which ever manner you want but it is another can of worms when speaking to other people, including classmates, co-workers, parents, usw.
Back to my story- In German, there are two ways of speaking to people: either the formal way (Sie) or the informal way (du). According to German grammar rules, the du-form is what you would use with friends and close family members; otherwise, you use the Sie-form (Obviously, this is just a basis explanation of du and Sie). The piece that had everyone discussing excitedly is when are you close enough to someone, like a co-worker for example, that you stop using the Sie-form and start using the du-form? Also, in which situations would you change back into the Sie-form?
So why was this topic so fascinating for me? Because I live with this struggle everyday. See, I work on campus (in case I hadn't already told you- haha). I also talk with Metro's staff and meet them at campus functions or even off-campus. Therefore, I have to think sometimes before I begin speaking: Is this someone that I need to be formal with? In what type of situation are we in at the present moment? Who is around? Even better- who else is listening?
Let me tell you a story: Once I spent my spring break in Grand Forks, North Dakota (stop laughing- honestly, it is the newest spring break hot spot). While there, I did not talk too much. I did a lot of observing. It was refreshing to see people that I normally interact with on campus in a new environment. I believe that their true personalities emerged like a butterfly from its cocoon (sorry- bad joke). Also, it allowed me the opportunity to connect with many other people in ways that I normally wouldn't be able to, i.e. they were comfortable in the situation and able to speak and act freely.
My reasoning for bringing up this adventure is to relay the satisfaction that I experienced AFTER returning from the trip when everyone was back to business. See, I was able to fine-tune this beautiful skill I have achieved over the year of being able to talk business and personal when the time is right and in the situation that is required.