Parliament has the power to make new laws and change old ones.
The government proposes the majority of new laws, but it needs the approval of Parliament to make such proposals stick - in other words, to turn bills into acts.
Since changes to the law can affect any aspect of social and economic life, it is important that bills are scrutinised thoroughly before they are approved.
So the parliamentary process gives MPs and peers many opportunities to challenge their colleagues' ideas and proposals.
Parliament is composed of two debating chambers: the House of Commons and the House of Lords.
Any MP or peer has the power to suggest changes, or amendments, to proposed legislation. Amendments are added onto the bill if they gain the support of a simple majority in the House in which they are proposed.
Mrs Thatcher came to power after Callaghan's defeat
But power is not evenly distributed between the two Houses.
The Commons, made up of elected MPs, can over-rule decisions made in the Lords, where members are not elected, by invoking the Parliament Act.
The House of Lords is therefore a revising chamber, and peers - many of whom are experts in a particular field of public policy, such as economics or health - regularly ask the government to re-think important legislation.
Where differences of opinion between the two chambers prove difficult to reconcile, a bout of parliamentary ping-pong may ensue - so called because a bill bounces back and forth between the Commons and the Lords until both chambers approve the final wording.
Such contests can continue into the small hours, since the government is understandably keen to preserve the substance of their proposals, but peers know that ministers will be reluctant to force them to climb down.
By pursuing this policy of brinksmanship, peers can force concessions from the government.
Considerable power is also wielded by select committees, which are groups of backbench MPs or peers charged with the detailed scrutiny of particular aspects of government policy, such as defence or home affairs.
They are able to summon expert witnesses to testify at Parliamentary hearings as they build up evidence on their chosen subject of inquiry.
Once their evidence-gathering is complete, they put their findings to the minister responsible who must then defend the government's policy.
This can be an uncomfortable experience if the committee has reached a damning verdict.
Where the leading lights of Welsh politics converge
Since 1997 Westminster has delegated some of its law-making powers to the Scottish Parliament and the Welsh and Northern Ireland Assemblies.
But it still legislates for the whole of the UK on some policy areas, such as defence, foreign affairs and constitutional matters.
Votes of confidence
By tradition, Parliament has the power to overthrow prime ministers.
If the government of the day loses the support of its backbench MPs, then it may face the ignominy a confidence vote.
This was the fate of the Callaghan administration in 1979, when MPs voted by a majority of just one vote to oust the government.
The resulting general election swept Margaret Thatcher to power in a landslide victory.