The issue here is that the UK is not a part of the Schengen area. The Schengen agreement, which has been implemented by 15 countries (Germany, Holland, Belgium, Luxembourg, France, Spain, Portugal, Italy, Greece, Austria, Finland, Norway, Sweden, Iceland and Denmark) entails a common travel area with shared entry requirements and an effectively borderless region. Thus, travellers entering the zone will undergo immigration and customs checks but, once inside, they can travel freely without further immigration checks. There are limitations though - a country can reinstate border checks during major events eg Germany is currently doing so as the World Cup is on, Portugal did so during Euro 2004. Also, France requests border checks on people entering from Belgium and Holland on a routine basis.
The UK and Ireland have a separate Common Travel Policy (albeit limited to native-born citizens of the the two countries) and have remained outside of Schengen. As EU members their citizens do have free movement within the EU but have to go through immigration when entering Schengen zone countries. This is generally just a formality and their passports are not stamped and no limit is applied to their stay (as per EU citizens). The same applies when Schengen area citizens enter the UK.
Customs checks on people travelling within the EU are by and large discretionary as duty-paid products can travel freely - there are some limits though, especially if one travels from the new EU members.
The 10 new EU members are not full Schengen participants as yet so border controls remain - they will have to join eventually. Switzerland is also joining Schengen soon.
Hop to it, fly for life!