You pay £145.50 a year for a colour TV license per household (I love how these are still differentiated btw, as if anybody is still paying £49 for black and white). This money all goes to the BBC who air their channels (radio and online too) without ads.
There's like 50 odd channels free-to-air but most most are rubbish and/or extensions of the main channels. The traditional 5 channels are BBC1, BBC2, ITV, Channel 4 and Five which were what were on the old terrestrial analogue.
http://en.wikipedia.org/wiki/List_of_digital_terrestrial_television_channels_%28UK%29
Interesting, sounds like a shit setup. Not that ours is any better.