In the US it varied and there are no hard and fast rules. With the larger companies demos were really for radio stations AM (mono) FM (stereo). When FM became popular, that's when you saw mono / stereo demos coming into vogue - AM stations would play the mono side, FM stations the stereo side.
Apart from companies selling demos as a tax scam (O'Keh for example), generally you could assume that the demos were given out to DJs to play on radio. If there was negative or no reaction, sometimes the issue would be pulled from the release schedule, but more often than not with the larger labels the issues had already been pressed ready for the shops. This was because the record companies wanted to be ready to get the record out if it was starting to take off and not worry about scheduling another time with the pressing company. If they pulled the release they'd just skip the issue copies in the bin. Anyway that's why some issues are v rare while demos are plentiful.
Sometimes they only went for a regional market, i.e. demo'd the record around a certain area and then only went national if they got a favourable reaction. That's where the "Regional breakouts" came from, Billboard etc would run lists of records that were getting played in different geographical areas. A record could be a "breakout" on radio in Baltimore, but be doing nothing in New York for example.
As for timelines between demo and issue that really depended on the reaction, if something started to take off fast, then the issues would be out and in the distributors hands very quickly - within a week sometimes. Othertimes not could take up to two months before the issues got out.
When you look at smaller labels where there wasn't the budget or standardised process, that isn't necessarily so, sometimes just demos or just issues were made. There is no hard and fast rule.