What are the differences between the various 'you' forms in German?

In German, unlike in English, there are 3 different ways to address someone and say 'you'. In English, we have one easy way to address one person, two people, or a group of people, and it doesn't matter if you are talking to friends, family, teachers or maybe even someone higher up, like a doctor or a lawyer.

In German, things change here slightly. It is very important to consider the amount of people first, and then secondly, if you know the person well or not. If you know them well, and there is only one person, you use'du'. When it is more than one friend or family member, or someone that you know well, it is 'ihr'. And finally, if it is one or more people who you don't know well, or who you see everyday but has a 'higher ranking' (like a teacher for example), you would use 'Sie'.