Spanish people can be quite formal until they are introduced. After that, the rules are relaxed.
Once you are considered a friend, you will be treated in a warm and familiar way, and polite formulas will not be necessary.
As is the case in many other countries, you will find that the manners of the older generation are usually more formal, and a certain distance should be maintained. Always, when in doubt, err on the side of good manners.
Women should greet each other and men with a kiss on both cheeks. Men shake hands, and they hug close friends, loudly slapping each other on the back at the same time.
Spaniards are generally very tactile people. They will often touch your arm to emphasise a point or a joke.
At times, however, they may to outsiders seem discourteous, or even rude. "Please" and "thank you," considered normal among English-speaking people are thought to be excessive and unnecessary among family and friends, or in everyday exchanges in shops and restaurants. For example "Dáme un café" ("Give me a coffee") is not considered impolite. It is the waiter's job to serve the customer, and no extra niceties are needed.
The Spanish can be very direct once they get to know you. If you are not looking your best today, they will tell you. They think it, so they say it, and tact does not enter into the equation.
However, this directness has its brighter side. The Spanish are the masters of piropos (compliments) - to their friends and to the passer-by. In the market, vendors refer to or address women as "Princessa" ("princess") and "Reina" ("queen"), and on the street Spanish men are not shy of showing their appreciation of the female form. A cheerful "Hola, guapa!" ("Hello, gorgeous!") is often to be heard. Try not to be annoyed; if you ignore the comment, that is as far as it goes. Even better, accept the compliment with a smile, and go on your way.
* Extracted from Culture Smart! A Quick Guide To The Customs & Etiquette of Spain by kind permission of Kuperard Publishers. The guide is available from their website www.culturesmartguides.com.