Info from Wikipedia 
Information from Wikipedia on the Concept of Internet TV

Internet television allows the users to choose the program or the television show they want to watch from an archive of programs or from a channel directory. The two forms of viewing Internet television are streaming the content directly to a media player or simply downloading the program to the user's computer. With the "TV on Demand" market growing, these on-demand websites or applications are essential for major television broadcasters. For example, the BBC iPlayer brings in users which stream more than one million videos per week, with one of the BBC's headline shows The Apprentice taking over three percent to five percent of the UK's internet traffic due to people watching the first episode on the BBC iPlayer. Availability of online TV content continues to grow. As an example, in Canada as of May 2011 there were more than 600 TV shows available for free streaming, including several major titles like Survivor, and The Daily Show with Jon Stewart.[4]
Every night the use of on-demand television peaks at around 10 pm,[5] Most providers of the service provide several different formats and quality controls so that the service can be viewed on many different devices. Some services now offer a HD service along side their SD, streaming is the same but offers the quality of HD to the device being used, as long as it is using a HD screen. During Peak times the BBC iPlayer transmits 12 GB (gigabytes) of information per second.[6] Over the course of a month the iPlayer sends 7 PB (petabytes) of information.Before 2006, most catch-up services used peer-to-peer (P2P) networking, in which users downloaded an application and data would be shared between the users rather than the service provider giving the now more commonly used streaming method. Now most service providers have moved away from the P2P systems and are now using the streaming media. The old P2P service was selected because the existing infrastructure could not handle the bandwidth necessary for centralized streaming distribution. Some consumers didn't like their upload bandwidth being consumed by their video player, which partially motivated the rollout of centralized streaming distribution.[7]
Hopefully the above article has given you better understanding of the broad concept of what it means to watch tv online.