Okay... I know this is very basic but... How do I know when to use an open chord versus using a barred chord?

should that depend on what sound you're going for?  Personally, I find barred chords to be a little less interesting... more "generic" because it's such an easy sound to produce and has little variation from the way the strings are tuned to the guitar.  If you slap a finger across the neck of the guitar and wack the strings, it's only modulated up a few half steps from having not held it at all.  By using something more open, your notes (even subconsciously) become more interesting, since the distances in tone between each string change around from the standard tuning....  ie, if your guitar is tuned to E A d g b e, then barring across really only raises the tones an equal amount on all strings (plus an added d or g string pressed on a fret 2 higher or something, etc).

but if you use something more open, the strings will be held at places that make each one raise its pitch independantly of the others... hence, the sound is more interesting to hear. 

is this what you're talking about?  i mean, in the end, it's up to you.  This isn't all to say that barred chords are bad somehow.  I'd just say... Mix them up in what you use, so as to make it even more interesting by not sticking to just one style of chord.

It depends so much on the style of music you are going for.  Free-strumming something, or maybe for simpler fingerpicking, you are going to want to stick with open chords.  Something with a chunkier strumming pattern, far more complex chords or most jazz you are going to want to stick to barre chords.

Learn CAGED---it is without a shadow of doubt the single greatest tool for a guitarist.  Plus it teaches you why the guitar is tuned so weird.

I agree 100%  

You should work on knowing the notes  and locations of notes on the neck of all chord forms.. Get Ted Greens books on chords and chord progressions and don't be lazy , work through all of them.  You'll gain a tone of knowledge and never lack for finding the "right chord sound"  also learning music theory will help in chord substitutions and music expression.

when you get into a more complex style of playing (lets say classical or flamenco or jazz) you will often be playing around a melody line, so sometimes the chords chosen or used is by necessity a barr chord or open chord or both.

Really I don't think their is a formula or at least I haven't found one..

when I play out live I often move chords all around  to different positions and inversions just for the fun of it.