A party wall is defined by section 20 of the 1996 Act.  
Section 20(a) states a party wall means 'a wall which forms part of a building and stands on the lands of different owners to a greater extent than the projection of any artificially formed support on which the wall rests'. This is known as a 'type a' party wall. 
In simple terms this means that you ignore the position of the foundations, even if they encroach over the boundary and only consider the position of the wall itself.  
If the wall straddles the boundary it is, according to the above definition, a party wall. It does not have to straddle the boundary equally, it can be more to one side than the other. The wall also has to form part of a building. What that means is, at least one side of the wall must be enclosing some part of the property such as the outside wall of your kitchen, for example. 
There is however, another type of party wall.  
This is defined under section 20(b) of the 1996 Act. Essentially, this is a wall that does not straddle the boundary but instead has been built right up to the boundary line completely on the land of one owner. If the owner of the land next door then attaches their extension onto this wall and uses it a separating wall between both buildings, the area of wall that the owner next door has used, becomes a 'type b' party wall. The owner next door does not have a right to do this without your permission as this would constitute a trespass, but many owners do this not realising. There is no difference in your neighbour attaching to your wall which is built against the boundary and the neighbour attaching to your wall which you may have built half a metre away from the boundary. They are both a trespass, albeit the the latter has taken more of your land. 
If you have built an extension wall against the boundary line which is say, 4 metres long and 3 metres high and the owner next door, with or without your permission builds an extension 3 metres long and 3 metres high, only the part they have enclosed will become a type b party wall. In other words, the last 1 metre that the neighbour did not use will not become a type b party wall. 
Many people are unaware that a neighbour can, by way of an easement, establish a right to continue using a wall so enclosed after a period of 20 years. The owner of the wall also loses the right to sue for removal of the trespassing structure after 12 years. This is how a significant number of type b party walls come about. 
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