The peerage is a legal system of largely hereditary titles in the United Kingdom, which is constituted by the ranks of British nobility and is part of the British honours system. The term is used both collectively to refer to the entire body of noble titles (or a subdivision thereof), and individually to refer to a specific title (and generally has an initial capital in the former case and not the latter). The holder of a peerage is termed a peer.
In modern practice, only members of the Royal Family are granted new hereditary peerages. Only life peerages which carry the personal right to sit and vote in the House of Lords are generally granted to honour individuals in modern practice, the last non-Royal hereditary peerages having been created under the Thatcher government. Peerages, like all modern British honours, are created by the British monarch, taking effect when letters patent are affixed with the Great Seal of the Realm. Her Majesty's Government advises the Sovereign on a new peerage, under a process which scrutinises appointments to political honours. Currently a few hereditary peers, who are elected to represent the others, also retain the right to sit and vote in the House of Lords, as of 1 July 2011 (2011 -07-01) only 90 members sitting by virtue of a hereditary peerage remain.
The Sovereign is considered the fount of honour, and as "the fountain and source of all dignities cannot hold a dignity from himself", cannot hold a peerage (although the British Sovereign, whether male or female, uses the style "Duke of Lancaster"). If an individual without a peerage is neither the Sovereign nor other royalty, s/he is a commoner. All members of a peer's family are commoners too; the British system thus differs fundamentally from continental European ones, where entire families, rather than individuals, were ennobled. Nobility in Britain is based on title and not on bloodline. For example, Peter Philips, son of HRH The Princess Royal is a commoner even though his mother is a princess and his grandmother, The Queen. He has no title, therefore, he is a commoner.
Certain personal privileges are afforded to all peers and peeresses, but the main distinction of a peerage nowadays is the style or title and traditional forms of address. The claim to an existing hereditary peerage is regulated by the House of Lords through its Committee for Privileges and Conduct.