First, a bit of background. The BBC is a national TV broadcaster which makes its own programmes (which may or may not star child-molesters) and which also shows them without adverts across an increasing number of channels, several of which are increasingly in HD. To fund this, it is a legal obligation for anyone who watches television at the time it is being broadcast on any equipment to have a TV licence, which is, at present £142.50 per annum.
Watching TV at the time it is being broadcast (i.e. video recordings, Sky Plus, iPlayer, etc. notwithstanding) is a criminal offence punishable by a £1,000.00 fine. The BBC has a whole enforcement arm, the TV Licensing Authority, dedicated to finding the miscreants who do this. Now their weapon of choice, as anyone who's ever lived in the UK knows, is to send threatening letters full of bluster about how "enforcement officers" are coming to visit (protip: they have no legal power to force entry without a search warrant so you can tell them quite happily to go do squat-thrusts on a fire hydrant) based on a giant database of which addresses are licenced and not. This is why whenever you buy a new TV or similar the retailer must fill out a form to send to TV Licencing. Naturally, this leads to businesses and other non-residential addresses getting red-ink letters warning of prosecutions and fines and suchlike as well. But still.
Now. Following the Regulation of Investigatory Powers Act 2000, one of the things that they say they can use, and have been purporting to use for the past 60 years, is the Television Detector Van. The TV detector van is, I'm sure, one of those pieces of British folklore that nobody's ever confirmed as being real. There's tales of vans with weird-looking antennae on the roof cruising round the streets at tea-time, but I've never seen one, and nobody I know has ever seen one in the flesh. Later on, in about 2007 or so, handheld TV detectors were also introduced.
However, they actually do exist. The vans and the handheld detectors both. But there are so few of them that your chances of being caught by one are quite small. One blogpost claims that there's only 11 vans for the whole nation of 63 million folks.
So, how do they work? Well, firstly, there is the fact that most analogue television signals have to be processed through a component known as an "oscillator" whenever the device is on. According to this, television sets leak a signal whenever they are in use and by discerning the frequency of this signal, the detector van can see not only that the TV is in use, but by consulting a list of the frequencies of the various stations, which channel is being watched. However, this would only necessarily work for analogue signals, and all TV in Britain is now broadcast digitally. I also can't see how this might be true, as if TVs leaked the signal that they were receiving, wouldn't this cause interference, although I am not an AV engineer so I can't say authoritatively.
What they do now, however, and this is according to a witness statement of an Enforcement Officer filed in criminal proceedings against an alleged non-payer, is to use a device which is pointed at a property. Apparently this works by picking up the specific wavelengths of red, green and blue light put out by televisions which leaks from windows and similar, filtering out all other light sources either at the hardware or software level, and then building it back up into a picture. The BBC refuses to comment on how accurate this is (they refused to give our details of their detection equipment in case it allow licence-evaders to circumvent it) but that witness statement alleges 97% certainty that it is a television that is being watched. I assume that there's a copy of the Radio Times in the back of the van so that they can compare what appears to be being watched with what is on so as to show that it is being watched as it is broadcast.
Whether such a device would be able to detect television being used through curtains or similar is not something I can comment on.
However, what about people who live-stream off the internets television who do not have a licence? How are they detected? I have a speculation but I have no evidence whatsoever as to whether it is correct or not. When you use the BBC iPlayer to watch live streams, a box comes up warning you to ensure you have a TV licence before continuing and to click to confirm this. I can only assume that they've made it so that if you click "yes," it rats you out using IP geolocation to TV Licencing. But IP geolocation is hardly bulletproof...
In short, TV detector vans probably do exist, and I think they are used, but it is very rare and more used as a method to frighten people into shelling out. TV Licencing's main weapon to find people watching TV without a licence is probably reliant on them being daft enough to not let in the enforcement officers combined with that giant database.