Which formation shall I use to win the match?

If only this can be answered easily!  Do you go with a standard 4-4-2 formation (4 defenders, 4 midfielders and 2 attackers), or try to win by scoring more goals than you concede with an attacking 4-3-3?  Experiment and see which works best for your team and - importantly - your players!

In your team sheet the formation is inferred from the positions assigned to all players. You don't specify a formation in the teamsheet - you specify the positions your players play in. Generally, you can pick almost any known formation - as long as you have 11 players and there's one goalkeeper. You can in theory play a team without any width at all, but don't be surprised if your team won't shine - a healthy balance of defense and offense is required to play well.  Popular formations like 4-4-2, 5-3-2, 3-1-5-2 etc are proven and will certainly be the most effective.

To keep your players happy, and be in with a good chance of taking away something from the match, we have minimum and maximum numbers of players for each position:

Min_DF = 2
Max_DF = 6
Max_DM = 3
Min_MF = 1
Max_MF = 6
Max_AM = 3
Min_FW = 1
Max_FW = 4

What does the "tactics" option mean in the Team Sheet program?

A major issue any manager has to consider is the tactic his team will use to start the game:

• Normal (N) - The standard and most "basic" of tactics in TFO. It provides no special benefits, but also has almost no vulnerabilities. A team playing N will enjoy a steady mix of defense and offense.
• Defensive (D) - A team playing D focuses a lot on defense. If you want to keep the score down, giving a strong fight in the defense, but also not taking much opportunities in attack, D is the tactic for you. With this tactic your midfielders, and even attackers to some extent, focus more on the defense.  Your opponent will have a hard time scoring ... but so will you.
• Attacking (A) - Does exactly what it says on the tin. Your team is eager to score - the attackers stick near to the opponent's goal, the midfielders take a lot of chances and even the defenders join in to help. This all gives good offense, but your defense will suffer greatly.
• Passing (P) - Your team will push forward, driving slow but efficient attacks. Naturally, when a team focuses on attack, the defense is weaker. This tactic is more offensive than N but less than A.
• Counter Attack (C) - The defenders concentrate on defense, but seek opportunities to drive the midfielders and attackers to stinging counter-attacks. This tactic is more offensive than D but less than N.
• Long Ball (L) - A Beginner's tactic.  Sometimes a sure-fire winner, often not - it largely depends on the opponent. With L, your attack is driven by long balls right from the defense, and midfielders play a minor role. This tactic is usually used by teams with relatively weak midfielders.
• European (E) - Total Football!  Complete opposite of the Long Ball.  Similar to the speed of the Passing tactic, chances are created from the back with measured passing and silky skills.