In Germany there are two acceptable ways to address someone using the word "you": by using "du" or "Sie". One is familiar and one is formal. It's similar to "tu" and "vous" in French. You may ask if it really makes a difference… in most cases, it really, really does!

Addressing someone as "Sie" is a sign of respect, formality and distance. It defines relationships. When you are invited to use "du" with someone, it means the relationship has shifted and become more familiar; you are on a first-name basis. But German's tend to keep their distance in relationships much longer than many other cultures. There is a noticeable difference, and distance, between close friends and acquaintances.

Your boyfriend's parents may never invite you to "duzen", meaning to address them informally. It may seem that they feel you are not good enough for their perfect son, but in reality, there is a code to be followed and when the timing is right, your potential in-laws will suggest you address them using "du". That might send signals that you have been accepted and are there to stay!

What is amazing to most of us often-informal English speakers is that colleagues who have worked together for years and years or sometimes decades, who might even share an office, still address each other as Herr Schmidt or Frau Mueller, and of course, use the "Sie" form. It is quite normal for Germans and is not overly formal if you are German or understand the culture.

Here are some general guidelines:

Use "Sie" when:
meeting someone for the first time
speaking to someone older than 16
speaking to your boss or colleagues
generally, in business situations
speaking to people in positions of authority
meeting your boyfriend's parents for the first time and anytime thereafter
speaking to the cleaning attendant in the public lavatory

Use "du" when:
speaking to family and close friends
speaking to a child/young adult 16 or younger
generally, in informal situations such as meeting with fellow students (i.e. at University)
you have been invited to use "du" by someone you would normally use "Sie" with

My experience is that Germans really do appreciate the du/Sie distinction. Everyone knows the nature of the relationship and nothing is unclear. However, times are changing. These days, more and more "young" people, those under 30, choose to use "du" more often than the "Sie" form.

Those who don't know what is expected or are not familiar with German customs and language, for example foreigners like us, may use "du" all the time and never "Sie". This could be construed as disrespectful or, in the worst case, as an insult. I always felt it easier to address everyone using "Sie", as "Sie" is always followed by the infinitive form of the verb (no need to conjugate!) and was easier for me. But my German friends kept questioning me about it, so I now try to use the proper form with everyone I interact with.

Bottom line: When in doubt, use "Sie"! And do wait for your German counterpart to invite you to use "du".