Be interesting to hear about the technogoly behind this,I assume they must send all the popular channels, BBC 1 etc, to local 'nodes' rather than every single customer watching BBC 1 streaming from a central encoder otherwise you're dealing with terabytes of traffic..
Yes and no.
The connections aren't to the 'encoder' that is a bit of software that sits there (on Amazon-hosted servers these days I think - at least for pre-recorded content) and takes in a high quality feed and encodes it to the various 720/50p, 720/25p, 540/50p etc. variants at various bitrates.
These files are then distributed via content delivery network operators, who store copies of all the content and deliver it individually to each Laptop, Tablet, Phone, Smart TV etc. as it is requested. There IS a server connection for every single user.
Live streaming, as I'm sure people have noticed, isn't quite 'live'. AIUI the way this is handled on some platforms (and how pre-recorded shows are now also handled) is that the video stream is broken down into small chunks (order of a couple of seconds long) and these files are accessed in order to create a seamless stream, also allowing you to switch on-the-fly to chunks at lower or higher bitrates. This is how iPlayer works and is described as unicast - as each 'cast' or stream is to one person (hence the uni)
Of course this has a downside. Many content delivery networks will charge you 'per bit delivered'. The more people who watch, the more you pay. (So popular shows cost more to distribute over IP than shows nobody watches...) If you have a lot of people watching you need massive server and connection bandwiths - which cost more money (and why the BBC outsource this I believe).
This is totally different to broadcast, where the costs are the same whether 60 million watch or nobody does...
Multicast delivery leverages an aspect of networking that allows the same packets to be received by multiple people on the same network. This allows a single network stream to be received by multiple users - with only one server connection providing it (and only taking the bandwith of a single stream). These multicast streams need to be handled at a much more local level than unicast - so ISPs need to be involved in their provision.
This is why BT are able to offer high-quality (satelilte, cable and terrestrial quality) streams over their multicast BT TV system, but only lower quality streams over their OTT service (which is unicast)
I would expect Sky will offer multicast IPTV over their broadband network in a similar manner. This is also how IPTV is offered in other parts of Europe (though often these are areas with fibre-to-home connectivity that can offer 100Mbs or 1Gbs connections)