Tapas culture varies a lot across Spain — here's specifically how it works in Madrid, where the tradition is alive but not identical to what you might expect from Andalusia or the Basque Country.
A tapa is a small portion, sometimes free with a drink in older-school bars (increasingly rare in touristed areas, still common in local neighbourhood spots). A ración is a full sharing plate of the same dish — what most groups actually order to eat properly. Pinchos, more associated with the north of Spain, are small items served on bread with a toothpick; you'll see them in Madrid too, especially in bars with Basque influence.
The classic approach is barhopping: order a drink and a tapa or two at one bar, then move to the next rather than staying for a full sit-down meal in one place. Cava Baja in La Latina is built for exactly this. Standing at the bar is normal and often cheaper than a table.
Lunch tapas culture picks up from around 1pm; dinner service rarely gets going before 9pm, and many of the best bars don't fill up until closer to 10pm.