A recent forum discussion had several people debate on the use of "ciao".
First of all, "ciao" is a friendly way of saying both "hello" (when meeting) or "goodbye" (when departing). It's generally intended to be an informal way to greet. However, the formality matter is a subject of controversy even among Italian linguists.
Ciao in origin was not informal, as it comes from the Venetian "Sciao", which is their way of pronouncing the word "Schiavo", meaning slave. So it was actually very reverential. When the word got outside Veneto it became informal, although I don't agree with the interpretation and try to use the word as much as possible within the boundaries of rudeness.
As a middle-aged man (in Dante's terms, i.e. almost 35), I find that more and more people use formal greeting words with me. There comes another important rule: if you say ciao to someone you're entitled to address them with "tu", while if you say "buongiorno" or the likes you should also use "lei". This works more or less like in German or French, even though the French tend to use more "vous" than we use "lei".
In general, you'll be ok saying "ciao" to all people younger than you (though they're likely to answer formally if you're evidently older) or with anyone who's the same age as you provided you're not older than, say, 40. In that case the "ciao" can be used reciprocally.
In business meetings things can vary. Some companies make it a rule to say "ciao" to everyone, others are more conservative. In doubt, ask or go for the formal way and wait for others to tell you "diamoci del tu".
Kids can always be addressed with "ciao" and they're likely to do the same. Some places where informality is a must (i.e. in the restaurant Antica Birreria Peroni, see my tip) you'll be addressed with "ciao" (in the best case :o).
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