V-brake setups typically have a large amount of leverage, so the pads need to be set extremely close to the rims in order to ensure that the brake pads can get good engagement before the brake lever bottoms out. Because the tolerances are so tight, v-brakes also tend to require that your wheels are very true.
This is how close the v-brake pads are set up on my gravel bike:
Tightening or loosening the cable
is how you set how close the pads are to the rims, but it needs to be so precise that it can be challenging to get it right by messing with the pinch bolt on the brakes themselves. Most bicycles with v-brakes have a barrel adjuster where the brake cable exits the brake lever, which can help with fine-tuning.
The tension screws are for
centering the brakes. If one of the brake arms of the v-brake is closer to the rim than the other, you can use the tension screws to adjust this. Screwing in the tension screw on a side will cause the brake pad to sit farther from the rim on that side (and the brake pad on the other side to sit closer to the rim).
Moving the spacers around isn't really a good option for adjusting the spacing between pad and rim. The purpose of the different spacers is to allow the v-brakes to work on different bicycles; the narrower spacers are handy if you're setting up the brakes for a really wide rim or if the frame's brake posts are close together.