One of the most important, and most confusing, aspects of the game is Status. It's importance is fairly easy to understand, if someone has more Status than you, then you are expected to show deference to them. Beyond that however, Status gets extremely complicated. I am going to try to explain some of the confusion and provide a bit of a primer on the concept.

Jim IS Status 3, But Jim Is NOT Status 3.
The inherent confusion with Status is that it is not something your character knows. Your character knows that Jim is the Controller or the Gangrel Priscus, but he would not refer to that individual as having Corporation Status 3 or Clan Status 3. Instead, it is simply how two people interact with each other. If a new arrival to the city is introducing themselves to the Division Head, and insults the DH, then they will likely be fucked over socially or even killed, but In Character the new arrival doesn't think the Division Head is Status 5, and I am only Status 1, but I am a rebel so I am going to insult the DH. They just know they insulted someone who is more important than they are, and may well face consequences for their actions.

This goes double if a Harpy or the Division Head takes or gives Status. If your Status is raised or lowered, your character doesn't say, "Oh, I have Status 2 now" but they know that the Harpy or Division Head is supporting them and that gives them more standing within Kindred society, or they are detracting from their standing.

Status As Society's Perception
So, what good is having a Status Merit? To start with, even though we don't walk around saying "I'm Status 4, and you're Status 3, so I am better than you," we still have an observed hierarchy. Furthermore, the granting and removal of Status by the Harpies or Division Head is an intentional, public act of making the society aware of the respect (or lack thereof) due a Kindred. This changes the dynamics of society, and while we don't say "Oh snap, Remy just removed 1 Status from Montague for picking his nose during a speech", it's still important to reflect the change mechanically.

That's Nice, But What Does Status Give Me?
Excellent question, the answer to which is you get a bonus to non-Discipline social rolls equal to your Status, and your Status adds to Eminence and Ascendancy calculations. This means that if someone of higher authority than you is trying to Intimidate you, it's easier for them, because you have to defer to them. This is similar to your boss at work chewing you out. You don't have much recourse, because he's your boss.

The second aspect of Status from a mechanical benefit perspective is that it adds to your Clan's Eminence and Ascendancy. Each month, the Clan with the most collective Status is Eminent, and the Covenant with the most collective Status is Ascendant. Those groups then get special benefits. Who doesn't like special benefits?

Multiple Types Of Status
Another area of complication arises from the fact that every character has three types of Status, Corporation, Clan, and Covenant. What happens if you are interacting with someone who is the same Clan as you, and you have more Corporation Status, but they have more Clan Status? To determine how you should interact, you should evaluate the circumstances. Is it a Clan matter? If so, then you should defer to them. If it's a Corporation matter, then they should defer to you. If it's unclear, then you both have to defer to the other which is a bit confusing, but then social interaction often is.

Gaining or Losing Status Quickly
Between gaining positions, Primacy/Inferiority, Harpy/Division Head powers, and Eminence/Ascendancy bonuses, it's possible for a character to jump or lose more than one point of Status in a month. This should be rare, but should be reflected through rolelplay. In general, people should try to keep Status jumps to one (1) per month, and characters should roleplay this out by deferring continued recognition knowing that it could reflect poorly on them in the long run and on the one continuing to praise them. However, if someone gains a position, and gets recognized for their work they can't very well turn it down without harming themselves in the process. As such, other characters should react in character. You might be pleased if their jump in status benefits you, or look at them unfavorably if you see their jump as unworthy or it hurts you in some way.

Hopefully, this helped clear up Status some, but if you still have questions, let me know.