As far as Japanese suffixes go, "-chan" is a hard one to adequately describe. The
canon usage of the word, and the one that
anime fans will be most familiar with, is among
schoolgirls, but "chan" can be affixed to anyone's name when expressing
affection or
awe of cuteness. Most of the time, "chan" is used for girls, children,
heartthrobs, and other
cute machines.
The trick to using "chan" like a true nihonjin is knowing how to abbreviate names. It is horrendously bad linguistic form to affix "chan" to any name over two syllables without cutting off part of the name first. For instance, if you're referring to a girl named Yukiko, do not call her "Yukiko-chan": call her "Yuki-chan."
"Chan" can also be appended to a boy or man's name to express the idea that he's cute. As you might expect, this practice is very common among women, but unheard of among men (who would probably sound very fruity if they tried it). Sakamoto Kyu, for example, was popularly known as "Kyu-chan," and Tsuyoshi Shinjo as "Shin-chan."
In some situations (as in Shinjo's case), "chan" can be affixed to a shortened last name. This is very rare, though, and you'll only hear it if someone has a unique last name. Most of the time, "chan" implies a first name basis, and uses a person's first name.
"Chan" cannot be used in combination with keigo, unless you want to sound like you're stark raving mad. It goes naturally with plain form speech, and on rare occasion (usually when dealing with small children), the polite -masu form. Don't use it on your boss: you won't get any brownie points, unless your boss is looking to get laid.
I used to know a girl named Marcela, who was called "
Maruchan" in Japanese... just like the
ramen maker. Ha!