Squeezing a (full) 16:9 picture on a 4:3 screen is called
letterboxing. You only do it once, either at the source, or at the
display device.
You are probably watching an analogue broadcast,
and there the letterboxing is usually done at the TV company if needed,
resulting in a 4:3 transmission format with black bars at top &
bottom. Therefore you need to keep the TV at the 4:3 setting.
For a
real 16:9 source, you'll need an STB, DVD player or some such - they
will signal the TV through the SCART connector and tell it what the
current picture format is, and the TV should switch automatically. So in
practice, you should never need to manually set the format on the TV;
only when there is something wrong in the setup, and the automatic
signaling doesn't work.
There are aspect ratio signalling systems
for analogue transmissions as well, but there are still a lot of old TVs
in use that don't know anything about them. That's why the networks
usually choose to always transmit in 4:3 and do the letterboxing at the
source, if needed. Unfortunately this also means that some of the
available vertical resolution is lost for widescreen material.