You pay your licence for the terrestrial BBC channels that you still get, and you pay for them whether you watch them or not. Yes it is a subject for debate, but that does answer your question.
The TV licence gives you permission to operate a television receiver at the stated address. Which channels (if any)you choose to watch is entirely up to you. The money collected is currently given to the BBC to fund its terrestial programmes but this is irrelevant to the fact that to operate a television receiver in this country, you need a licence.
There has been one test case in which a chap proved in court that his Tv had been modified to only receive satellite channels and so he didn't have to pay a license fee. Seemed a lot of trouble to go to just to get out of paying �110 though.
i think the guy proving he only received satellite so did not have to pay for a license is an urban myth - i mean you still get the bbc channels on satellite !!!!
freeview is so called because you get the extra channels at no extra cost to your current license fee ie no additional subscriptions etc etc