Ex-Insight driver transitions to Prius III...and LOVES it!

As far as -when- to use EV mode, the controlling factor is remembering that electric power is created from gasoline. It's about 50% efficient, compared to just burning the gasoline in the engine to push the car directly (as in driving down the road with the engine running). Your biggest waste of fuel (assuming you are good at controlling your desire to accelerate fast) is the warmup cycle.

So:
You need to move the car in the driveway. Use EV.
You need to go get groceries - farther than about 3 km. Don't use EV.
You're stuck in traffic. Here it's not so clear, but if you're going to be stuck for more than 5 min. (sadly most of the time this is the case) don't use EV. The car will use electric whenever it is most practical. Be very gentle on the accelerator, even if morons will cut in front of you.

That's the basics as I understand them.