In the UK, Parliament is sovereign. As such, the British Monarchy can be abolished by an Act of Parliament. It is the popular will of the people that prevents that happening.
That the British people should choose to maintain the monarchy, or that Canada and Australia should choose to have the Queen as their Head of State, confuses outsiders (particularly Americans) no end.
I would say that it is the rest of the country politely pretending that the Queen actually holds the enormous power she is legally entitled to. It is the law that is a polite fiction.