Drugs are not legalized, only decriminalized.
We can have up to 10 times the daily dose with us, it will just be apprehended and we may have to go to a psychiatrist, usually the cops don't really care and we don't have any penalties if its the first times. If we have more than the 10 day dose it's considered traffic and then it is a crime.
The 10 day dosage rule is a little off, for weed it's 25grams, for hashish is 2.5g, which is stupid, hash here is low quality, so in my opinion the dosages need a little more fine tuning in some instances
There are exceptions, if you are caught with divided dosages for example, even if it´s less than the 10days dosage it may be considered intent to sell, and thus a crime.
Even if you are just passing a joint to someone that may be considered incentive to consumption and also a crime. The way around this is that usually we don't hand joints, we just "discard" them in the nearest table or something for the other guy to pick up
Its very rare that this happens, even the psychiatrist thing is rare for casual users, but its really up to the police to decide. they just get your data the first times, if you are caught more than once then you probably end up in the psychiatrist
The stance in Portugal is that drug users are not criminals but clinical patients.
The usage rates have dropped, and at least our prisons aren't crawling with normal guys that just use some substance. If it didn't help, it certainly didn't make it worse, and it cut a lot on the expenses the war on drugs brings.
We still have a long way to go, but we are in a very good direction, at least judging from what i read about other countries
i may get you some nice articles with data about portugal policy on drugs if you wish