Pike and shot
Normal attrition of combat units (including sickness and desertion) and the sheer lack of men usually led to the tercios being far smaller in practice than the numbers above suggest but the roughly 1:1 ratio of pikemen to shooters was generally maintained. The tercios for all armies were usually of 1,000 to 2,000 men, although even these numbers could be reduced by the conditions already mentioned. Tercio-type formations were also used by other powers, chiefly in the Germanic areas of the Holy Roman Empire.
To modern eyes the tercio square seems cumbersome and wasteful of men, many of the soldiers being positioned so that they could not bring their weapons to bear against the enemy. However, in a time when firearms were short-ranged and slow to load, it had its benefits. It offered great protection against cavalry – still the dominant fast-attack arm on the battlefield – and was extremely sturdy and difficult to defeat. It was very hard to isolate or outflank and destroy a tercio by maneuver due to its great depth and distribution of firepower to all sides (as opposed to the maximization of combat power in the frontal arc as adopted by later formations). The individual units of pikemen and musketeers were not fixed and were re-ordered during battle to defend a wing or to bring greater fire power or pikes to bear in a certain direction. Finally, its depth meant that it could run over shallower formations in a close assault – that is, should the slow-moving tercio manage to strike the enemy line. 
Armies using the tercio generally intended to field them in brigades of at least three tercios, with one in the front and two behind, the rearward formations echeloned off on either side so that all three resembled a stepped pyramid. The word tercio means "a third" (that is, one third of the whole brigade). This entire formation would be flanked by cavalry. The musketeers, and those arquebusiers whose shooting was not blocked by friendly forces, were supposed to keep up a continuous fire by rotation. This led to a fairly slow rate of advance, estimated by modern writers at roughly 60 meters a minute. Movement of such seemingly unwieldy groups of soldiers was difficult but well-trained and experienced tercios were able to move and manoeuvre with surprising facility and to great advantage over less-experienced opponents. They would be co-ordinated with each other in a way that often caught attacking infantry or cavalry with fire coming from different directions from two or more of these strong infantry squares.

The French failure to keep pace: The great rivals of the Spanish/Habsburg Empire, the Kings of France, had access to a smaller and poorly organized force of pike and shot. The French military establishment showed considerably less interest in shot as a native troop type than did the Spanish until the end of the sixteenth century, and continued to prefer close combat arms, particularly heavy cavalry, as the decisive force in their armies until the French Wars of Religion; this despite the desire of King Francis I to establish his own pike and shot contingents after the Battle of Pavia, in which he was defeated and captured. Francis had declared the establishment of the French "Legions" in the 1530s, large infantry formations of 6,000 men which were roughly composed of 60% pikemen, 30% arquebusiers and 10% Halberdiers. These legions were raised regionally, one in each of Normandy, Languedoc, Champagne and Picardy. Detachments of around 1,000 men could be sent off to separate duty, but in practice the Legions were initially little more than an ill-disciplined rabble and a failure as a battlefield force, and as such were soon relegated to garrison duty until they matured in the seventeenth century.
In practice, pike and shot formations that the French used on the sixteenth-century battlefield were often of an ad hoc nature, the large blocks of Swiss mercenary, Landsknecht, or, to a lesser extent, French pikemen being supported at times by bands of mercenary adventurer shot, largely Gascons and Italians. (The Swiss and Landsknechts also had their own small contingents of arquebusiers, usually comprising not more than 10–20% of their total force. The French were also late to adopt the musket, the first reference to their use being at the end of the 1560s—twenty years after its use by the Spanish, Germans and Italians.
This was essentially the condition of the French Royal infantry throughout the French Wars of Religion that occupied most of the latter sixteenth century, and when their Huguenot foes had to improvise a native infantry force, it was largely made up of arquebusiers with few if any pikes (other than the large blocks of Landsknechts they sometimes hired), rendering formal pike and shot tactics impossible.
In the one great battle fought in the sixteenth century between the French and their Imperial rivals after the Spanish and Imperial adoption of the tercio, the Battle of Ceresole, the Imperial pike and shot formations shot down attacking French gendarmes, defending themselves with the pike when surviving heavy cavalry got close. Although the battle was ultimately lost by the Spanish and Imperial forces, it demonstrated the self-sufficiency of the mixed pike and shot formations, something sorely lacking in the French armies of the day.

Dutch reforms: Foremost amongst the enemies of the Spanish Habsburg empire in the late 16th century were the Seven Provinces of the Netherlands (often retroactively known as the "Dutch"), who fought a long war of independence from Spanish control starting in 1568. After soldiering on for years with a polyglot army of foreign-supplied troops and mercenaries, the Dutch took steps to reform their armies starting in 1590 under their captain-general, Maurice of Nassau, who had read ancient military treatises extensively.
In addition to standardizing drill, weapon caliber, pike length, and so on, Maurice turned to his readings in classical military doctrine to establish smaller, more flexible combat formations than the ponderous regiments and tercios which then presided over open battle. Each Dutch battalion was to be 550 men strong, similar to the size of the ancient Roman legionary 480-man cohort described by Vegetius. Although inspired by the Romans, Maurice's soldiers carried the weapons of their day—250 were pikemen and the remaining 300 were arquebusiers and musketeers, 60 of the shot serving as a skirmish screen in front of the battalion, the rest forming up in two equal bodies, one on either side of the pikemen. Two or more of these battalions were to form the regiment, which was thus theoretically 1,100 men or stronger, but unlike the tercio, the regiment had the battalions as fully functional sub-units, each of mixed pike and shot which could, and generally did, operate independently, or could support each other closely.
These battalions were fielded much less deep than the infantry squares of the Spanish, the pikemen being generally described as five to ten ranks deep, the shot eight to twelve ranks. In this way, fewer musketeers were left inactive in the rear of the formation, as was the case with tercios which deployed in a bastioned-square.
Maurice called for a deployment of his battalions in three offset lines, each line giving the one in front of it close support by means of a checkerboard formation, another similarity to Roman military systems, in this case the Legion's Quincunx deployment.
In the end, Maurice's armies depended primarily on defensive siege warfare to wear down the Spanish attempting to wrest control of the heavily fortified towns of the Seven Provinces, rather than risking the loss of all through open battle. On the rare occasion that open battle occurred, this reformed army, as many reformed armies have done in the past, behaved variably, running from the Spanish tercios one day, fighting those same tercios only a few days later, at the Battle of Nieuwpoort, and crushing them.  Maurice's reforms are more famous for the effect they had on others—taken up and perfected, and would be put to the test on the battlefields of the seventeenth century.

Swedish innovations: After bad experiences with the classic tercios formations in Poland, Gustav II Adolf decided to reorganize his battlefield formations, initially adopting the "Dutch formations", but then adding a number of innovations of his own.
He started by re-arranging the formations to be thinner, typically only four to six ranks deep, spreading them out horizontally into rectangles instead of squares. This further maximized the number of musketeers near the front of the formation. Additionally he introduced the practice of volley fire, where all of the gunners in the ranks would fire at the same time. This was intended to bring down as many members of the opposing force's front line as possible, causing ranks moving up behind them to trip and fall as they were forced forward by the ranks further back. Finally, he embedded four small "infantry guns" into each battalion, allowing them to move about independently and not suffer from a lack of cannon fire if they became detached.
Gustav also placed detached musketeers in small units among the cavalry. In traditional deployments the infantry would be deployed in the middle with cavalry on both sides, protecting the flanks.