Online TV is similar to cable tv and satellite TV (or dish TV). Instead of the television signals coming over cable lines or via satellite signals, the signal comes digitally over the public internet.
Is Online TV legal? Sometimes online tv is legal, sometimes online tv is illegal. It is illegal to decrypt, hack, descramble or rebroadcast existing tv signals without obtaining proper licensing from the channel broadcaster. The channel in turn may need to obtain extra licensing or contract addendums with the TV program/movie producers. You want to make sure, before buying online TV software or online TV service, that the TV service/software states they are completely legal and/or licensed.