The Legal Position

This quote is from the Communications (Television Licensing) Regulations 2004

Meaning of "television receiver"
9. - (1) In Part 4 of the Act (licensing of TV reception), "television receiver" means any apparatus installed or used for the purpose of receiving (whether by means of wireless telegraphy or otherwise) any television programme service, whether or not it is installed or used for any other purpose.

(2) In this regulation, any reference to receiving a television programme service includes a reference to receiving by any means any programme included in that service, where that programme is received at the same time (or virtually the same time) as it is received by members of the public by virtue of its being broadcast or distributed as part of that service.

For our purposes the important point here is that if you are watching something that is not live (ie not currently on television) then you do not need a TV Licence. This applies whether you are watching an internet download, Blueray DVD, Betamax video or even iPlayer. As long as what you are watching is not currently being broadcast then you are in the clear.

You dont need to rely on Nomad getting his facts straight here. No less a person than the Director of Future Media and Technology at the BBC itself admits that this is the case. "At the moment, the legal position is that you don't need a licence to watch TV [over the internet] purely on-demand, but you do if you are watching TV live (through any receiving device in the home)."

It is worth noting that not only is this in the regulations, it is also in the primary legislation which means that the government will not be able to change things on a whim.

See also the Wikipedia entry on this topic.