Depends on what you want to do by becoming
a British Citizen.  Passport is one thing but even if you don't have
passport, you can take part in many things such as voting.  Once your
application is successful, you will have the right to become a British National
whether you get a passport or not. Off course you can always decline it but No
one does.

Passport is just another identity card for
you and is not a requirement to get after your citizenship. Most peopel do get it because there are more benefits to British passport than any other. There are people holding British passport and are not Citizen of UK.

Thanks Waheed for your quick response.

I understood everything but the last statement. I am surprised that is also a possibility - i.e. holding passport inspite of not being a citizen.

Thanks anyway.....

"To get naturalized" equals "to obtain citizenship". Once you are citizen, you may apply for a passport, but you don't have to. In fact, you do not need a passport unless you wish to travel outside of the United Kingdom. You can perfectly be a citizen, (not even naturalized, but native citizen) and live your entire life in the UK without ever applying for a passport.

Assume, your Naturalisation application is successful. I reckon, you are still not a British Citizen. It just makes you eligible for applying for British Passport. You become citizen NOT when your application is successful, but when you get a British Passport. Right?

I think they are called British National Overseas.  People from Hong Kong and some other colonies.  You can read more about this option on the Internet.  I am not that familiar with it.  If you find anything intresting let everyone know here too.

Waheed