Strictly speaking, when one person recites Kiddush on behalf of others, his drinking of the required amount from the Kiddush cup suffices for everyone to fulfill the obligation of Kiddush. Even if those around the table do not drink any wine, they all fulfill the obligation of Kiddush once the individual who recited the Kiddush drinks the proper amount. Nevertheless, Halacha considers it a special Mitzva for everyone at the table to drink from the Kiddush cup.
The Sha'ar Ha'tziyun (notes that the Chafetz Chayim appended to his Mishna Berura commentary to the Shulchan Aruch), at the end of Siman (chapter) 271, discusses the question of the proper procedure when everyone assembled drinks from the Kiddush cup. According to Halacha, once a person's lips touch a cup to drink, the cup becomes a "Kos Pagum," a "deficient cup," from which it is improper for anyone else to drink. Thus, the Sha'ar Ha'tziyun notes, when the one reciting Kiddush drinks from the cup and then pours from that cup into other cups for those assembled at the table, all their cups are "Pagum." What, then, is the proper procedure for distributing the wine from the Kiddush cup?
The Sha'ar Ha'tziyun advises following one of two options. The first is for everyone to drink directly from the Kiddush cup. Since everyone is drinking from the actual cup upon which Kiddush was recited, the problem of "Kos Pagum" does not apply. Alternatively, he suggests, the person reciting Kiddush can add wine to the cup after he drinks it, thereby divesting it of its "Pagum" status. He may then pour wine from the Kiddush cup into other cups from which everyone else will drink.
Summary: Those who listen to Kiddush fulfill their obligation even if they do not drink wine from the Kiddush cup, but nevertheless it is a Mitzva to drink some wine from the cup. The Kiddush cup can be passed around the table for everyone to drink from it, or, the one reciting Kiddush can add wine to the cup after he drinks from it, and then pour from it into other cups for those assembled at the table.
