Were torches used as often as we see in movies?

No. Movies generally seem to show torches as the most common light source for medieval people, when in fact rushlights (reeds soaked in animal fat), tallow candles and simple oil lamps seem to have been much more common.

What were torches made of?

Usually a wooden handle (possibly with some metal fittings), some kind of fibre to act as a wick and oil or fat to serve as fuel (apparently some of them used other forms of fuel, like sulphur and pitch, which seems even less practical). The fibre is soaked in the fuel and either wrapped around the handle or stuffed inside, depending on the design.

How functional were they?

Based on modern reconstructions, not very. They are heavier and more difficult to carry than other forms of lighting, they can't be conveniently put down on a flat surface as most alternatives can and the light they produce is very flickery and difficult to see by. The only benefit seems to be that they are fairly easy to make and less prone to being blown out than a rushlight, which is the other simple-to-manufacture medieval light source.