Yes heno, everyone who will apply for both the ILR and British citizenship is required to take this test. The test is to determine if an applicant have sufficient knowledge of the UK life and also profiency in English.:rolleyes

An applicant actually have 2 choices: either attend an English profiency class or take the test.
A letter will be given out to the applicant once the classes are completed or pass the test (In my case, I was given what they call the Pass Notification Letter, which I submitted alongside my application form and other documents to the border and immigration agency.).

This was among the changes that took effect last April 2007 with regards to the visa application for the above mentioned plus the price hike of the visa fee (application via post was from 350 now is 750; via personal lodging is now 950).

I suggest you visit the home office website to give you a more detailed info with regards to this test.

Here's the link: www.lifeintheuktest.gov.uk/



Hope this helps.:)

joy:D