`Du` is used with people that you know very well:

Du trinkst eine Tasse Kaffee.

Du gehst jeden Tag in die Schule.

`Sie`is the formal form `you` and it is used with people you don't  know very well. It is also used in formal writing and such:

Kommen Sie bitte hierher!

Always remember that its always written in a capital letter and not to be confused with `sie` which is `they`.