Vous as a plural pronoun adresses a specific group. You--group of people--that I'm talking to right now. On is more general and also more...all encompassing, for lack of a better word.
To illustrate this with a sentence:
Vous ne devriez pas vous battre-- You two people that I'm talking to shouldn't fight.
On ne devrait pas se battre-- People in general shouldn't fight
I hope that helps (and makes sense).
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