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Taken from the UK Parliament website (see related links):

The Government does not resign when Parliament is dissolved; essential business must carry on and government ministers remain in charge of their departments until after the result of the election is known. Only then will the Queen ask the leader of the majority party to form a new administration.

During the period between dissolution and polling day, however, the Government suspends any advertising campaigns and refrains from major policy decisions or announcements. This was known as 'purdah' but is now usually called the pre-election period.

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After Parliament is dissolved, the current Government stays in power in what is called caretaker mode. In caretaker mode, the Government agrees only to take action on an issue if it is either (1) essential (e.g., if a law or treaty obligates the Government to make a decision on something before the date of the election) or (2) in response to a national emergency or crisis of sufficient severity (e.g., a terrorist attack, economic crisis or declaration of war). As always, essential functions of State are carried out by the civil service during this time, but with minimal - if any - ministerial oversight.

In the event an important, serious political decision has to be taken when the Government is in caretaker mode, the Prime Minister of the day will be expected to consult the opposition parties - either informally or through the Privy Council - and try to reach a satisfactory compromise between their positions, so that whichever party wins the election can stand by the final decision.

Caretaker mode usually ends on Election Night. If the ruling party is re-elected with a parliamentary majority, then it is usually considered to have resumed power as soon as it crosses the winning line. If the opposition party wins a parliamentary majority then caretaker mode continues until the current Prime Minister tenders his resignation and the resignation of his entire government, and the Leader of the Opposition is invited to Buckingham Palace to be asked by the Queen to form a Government. This is the only circumstance in which there is no sitting Government - the time between the resignation of one Prime Minister and the appointment of his or her replacement.

If there is a hung parliament (no party has a majority), then caretaker mode continues until one of two things happens:

(1) two or more parties form a majority coalition, allowing the Prime Minister to continue in office or - if the opposition forms the coalition - a new one to be appointed in his or her place

or

(2) the winning party, despite not having a majority of seats, still survives a motion of confidence, allowing it to go on and form a minority government. Alternatively, if no motion of confidence or lackthereof is brought, caretaker mode ends once it becomes apparent that a minority government isn't at risk of losing confidence in the House (i.e., the other parties agree to let them govern).

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