I've always wondered this. Yes, it means "you" but it must directly translate into a more formal "you," correct?
Originally, "thou" was used if you were addressing a single person, whereas "you" was used for addressing more people. Thou was saved only for intimate or disrespectful uses. So really it was more like "thou" was the same as "du", and "you" was the same as "ihr."
Sources: Wikipedia's article about Thou