> I figured in some rural areas this may not be the case, though. If, for 
> instance, the water were coming from a well...

In rural areas there will usually be a water reservoir on or inside a hill 
somewhere nearby.  If you water pressure is really so low that adding a tank 
in the roof helps, then you are going to have other problems with washing 
machines and boilers, I've seen some of them that demand a minimum water 
pressure of 1 bar.

> How do the on-demand hot water systems work, btw?

A pipe off from the mains cold supply goes into the boiler, gets heated, and 
then goes to all the hot taps.  A flow-rate sensor detects when a hot tap is 
turned on and fires up the boiler.  It is the same boiler that does the 
central heating, usually a smallish wall mounted unit like this:

http://www.petesheating.co.uk/images/examples/boiler_in_cupboard_2.jpg

(You can see in that photo there probably used to be a hot water tank there)

Advantages are higher efficiency, more space (no hot or cold tanks needed) 
and unlimited hot water.  The disadvantage is that unless you have a really 
beefy boiler and gas supply, the hot water isn't going to come out as fast 
as if you had a tank.  For a shower this is usually not noticed because the 
pressure is much higher, but you'll notice when it takes 2x longer to fill 
the bath!

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