The first and most important fact that needs to be grasped is that you cannot purchase a genuine British title, with the one exception of the feudal title of a Scottish baron; and you certainly cannot buy a peerage title.
In Britain the Sovereign has always traditionally been the sole person to grant titles, though in the last couple of centuries, this has very much been at the instigation of the Government of the day. The title (except in the case of Baronets or Knights) confers the right on the recipient to sit in the House of Lords, and pass on the title to his nearest male heir.
While it is impossible to fathom completely the process by which titles and other honours are awarded by the Government in the twice a year Honours List - at New Year and on the Queen’s Birthday - basically it is for achievement in many different forms: in business, politics, public service, charitable work, help to the community or commitment to their job.
In 1958 the British Government - a Conservative one - introduced the first radical reform of the system, by passing the Life Peerages Act. Though Life Peerages had existed for centuries, mainly given to women, this granted all the privileges of a hereditary peer on a life peer, or Life Baron or Baroness to be more correct, including the right to sit in the House of Lords, and for their children to be addressed as ‘The Honourable’.
In 1997 the Labour Party came to power with a commitment in their Manifesto to remove the right of Hereditary Peers to sit in the House of Lords, and in 1999 this was duly enacted; with the exception of 92 who were allowed to stay, but with no guarantee of how long for, and further ten who were granted Life Peerages because of the positions that they had occupied in the House of Lords previously.
The highest ranking Hereditary Title is that of ‘Duke’, followed by a ‘Marquess’ (sometimes spelt by Scots in the French way as Marquis), ‘Earl’, ‘Viscount’ and lastly a ‘Baron’; the last four are usually personally addressed both in normal speech and on paper as Lord, but not a Duke, he is much grander!
The most common title is that of a Knight, however, this means that you can call yourself Sir in front of your name, and is only for your lifetime; the equivalent for a woman is a Dame.
Just to confuse you further, there is also the title of Baronet, which is hereditary and means that you put Sir in front of your name, and Bt at the end, but the best places to find out more are on Hereditary Titles and also the website of The Standing Council of the Baronetage.
(The picture at the top of the page is of Sir Orlando Bridgeman, my ancestor and 1st Baronet, he was Lord Keeper of the Great Seal of England to Charles the Second, before being removed from his post for refusing to grant pensions to the Royal Mistresses)