"Surely that would be the British Library would have to archive every web page on the planet?? because their all "distributed" in the UK?"
I would argue that web pages are not distributed, rather they are imported. I don't send you my web content, you click on a URI to *request* my pages. In this way, I don't think that the BL needs to worry about every web page on the planet.
Also, given the enormous amount of *stuff* that the BL does get, I can see their point in doing this. It's part of the mandate of keeping a record of all-things-UK for history. In the "good old days" this was more manageable simply because of the fact that most people had no access or ability to publish something. Not so anymore. Apart from the fact that this is a HUGE undertaking, I believe that it has value--imagine historians 200 years from now trying to study the early 21st Century. They could have a good look at the same significant events from thousands of different perspectives. That's a big difference from looking at history through newspapers etc., which have their own political slants on everything. Nothing like getting a perspective from a sampling of a thousand people than just a small number of "traditional" information publishing sources.
How they plan on doing this is anybody's guess. I can't even begin to imagine the amount of storage space they will need. Perhaps they have some PhDs working on some new data compression algorithms? :)