The content of this topic could be really hard to get for an english speaker but more easy for a German or Spanish speaker.
We are starting with Italian subject pronouns:
I io (I) noi (we)
II tu (you, informal) voi (you)
III lui, lei (he, she) loro (they)
Lui (you, formal) Loro (you, formal)
So if I say "lei è andata al mare" it means "she gone to the beach".
It implies that when we use the pronoun "Lei" (She) we talking about a feminine noun.
What if I address a person in a conversation?
Should I use always "tu" (you)? Doesn't work like this in Italian, it depends on the context.
We make an example of these situations:
I'm 36, so if I should have a conversation with a kid I would address to him with "tu"
"Ciao, come stai?" (Hi how are you?)
It's the same if I talk with people who are the same age as me or generally with friends, colleagues, relatives etc.
Things change when I talk to people who I don't know or with people older than me unless they are, for example, relatives.
The pronoun "Lei" for example is often used in job interviews , TV interviews, politics etc.
Summarizing you can say that using "Lei" is a good way to approach someone in a polite way.
Hope you enjoy it!