This post is a little late but was made for anyone happening along this thread looking for a similar answer.
When you pass your test one of two things will happen, with respect to your licence:
1 - You will keep the licence and you will have to send off for your full licence yourself.
2 - You will hand over both parts of your licence to the examiner and they will arrange for your licence to be sent to an appropriate address.
Generally, nowadays, all licences are surrendered at the end of the test as this is by far the easiest and simplest method. However if you still own an old style, paper only, licence you will have to keep the licence and send it off together with the form named "D1 - application for a driving licence...". You can get this form from either your local Post Office or
HERE online by request.
I'll briefly explain what happens in both the examples above:
1 - If you elect to (or have to because you have an old style licence - an examiner cannot take receipt of an old style licence) keep your licence you will be expected to send off your old licence (both parts of the new licence or an old licence with relevant accompanying paper work: the completed D1 form along with 2 passport sized photos and any fee applicable) along with the DSA10 test pass certificate (which you MUST sign). When you get a D1 'pack' this will include an addressed envelope where you need to send all the above. The envelope is not already stamped and you would have to pay for that. I always recommend people to spend a little extra and send it recorded delivery. That way if anything goes wrong you can prove you posted it which will save you a lot of hassle from the DVLA/DSA.
At the end of the test, where you elect to keep the licence, the box in the bottom right of the DL25 (the test sheet) that says NO will be crossed. This tells the DVLA that the DSA has not taken receipt of the old licence so the DVLA knows to wait for the relevant paperwork to arrive by post before issuing your new licence.
2 - If you surrender your licence to the examiner at the end of the test then the examiner will take both parts of your licence from you. You will still be issued a DSA 10 pass certificate but this time you do not have to send this off and you get to keep it; to place on your wall or wherever you want to put it...
At the end of the test where you surrender your licence and you have no change of address to tell the DVLA about the box in the bottom right of the DL25 that says YES will be crossed. This tells the DVLA that the DSA have taken and destroyed the old licence so it is therefore ok to automatically issue the new licence to the held address.
If your address has changed (make sure you fill the relevant section in on your paper counterpart BEFORE attending for test) then the examiner will still take both parts off you but this time will cross the box, in the bottom right of the DL25, marked COA - change of address. Only your photo part will be destroyed this time and the examiner will send off your counterpart, with the new address, to the DVLA where, upon receipt, the DVLA will update their records and issue your new licence to your new address.
Just to clarify a couple of points (sorry mills705 :)) I have read above:
On the DL25 (your test sheet) you are only allowed up to and including 15 driving faults. 16 or more faults will result in a fail. One or more serious will result in a fail. One or more dangerous will result in a fail.
After passing your test you are given a certificate but this does not count as a licence in the interim and if given to the police as proof of your passing this will not be accepted by them. The DSA 10 is only valid within the DSA/ DVLA. As such you are not required to carry it around with you until your new licence arrives if you decide to drive. You are legally entitled to drive and do not have to wait for your licence to arrive by post first. Having said all that the DSA10 is still recognised by official bodies (inc. Insurance companies) and although the police would still require you to submit your new licence for inspection when it arrives there is nothing wrong with showing them the DSA10 if you are carrying it with you.
