Héctor: Yes, well you have basically described what happens. If people don't feel comfortable with the level of formality, they will let you know, like ‘That was too formal, you can use “tú” with me’. So it's better here to use the form “usted” and then allow the other person to tell you to use “tú”. So yes, both refer to the same person, that is the person who is addressed during a conversation.
The difference lies in the degree of formality. As you already said, in English, you don’t use one specific word, the degree of formality is more related to the grammar structure, such as an indirect question.
You could ask easily, where is the nearst bank? but more formally could be: could you tell me where the nearest bank is? Or with the use of “could” instead of “can”. Or maybe giving indirect instructions, instead of just using imperatives.