That's a fairly loaded question and would require a pretty lengthy response and will also depend on how your business is run. One thing I'd suggest is consider buying the Understanding Sales Order Processing book from Accolade Publications (www.accoladepublications.com/gp-category1). It's very thorough and really dives into the SOP module. All of their books are great and go way beyond a user manual.
I can try and give a high level overview of the process. When you create a Sales Order, there's a couple of options through the SOP Setup of the document type on how inventory will allocate. You can either have the system allocate the items automatically (based on valuation method) as the order is created, or have user intervention for the allocation. Once the order is created, you can print the Picking Ticket and the Packing Slip from the order entry screen. You can also print these by batch and other restrictions through the Print Sales Documents window. Once the order has been picked, packed, and shipped, the order should be transferred to an invoice. Once the invoice is posted, the inventory quantities will leave the system.
I've seen a lot of companies set up multiple Batch ID's to assist with the workflow of these steps that way it's easy for users to see the status of the order and what still needs to happen with it. Every company is different, though, so it's hard to say exactly how things should go. For example, you can set up different types of holds to prevent the order from being transferred when it shouldn't be.
For returns, you'll enter them through the same window as the order/invoice but once you post the Return, you need to apply it to the invoice through the Apply Sales Documents window. This is the same place you should be applying the credit memos to as well.
Hopefully I've answered some of your questions and again, I'd recommend the accolade book since there are alot of different options for how things work for the Order to Invoice process.