Terrorism is fairly new in the history of military strategies and tactics. It is not about winning a battle through violence, but about psychological intimidation, which seeks after a political end. This psychological intimidation is achieved by intentionally targeting non-combatant civilians, and hopes to reach its ends by so creating fear among a general population, such that this fear then forces the leaders of such a people to change policies.
Ages ago, warriors fought warriors. There were, to a degree, codes of honor. After a battle, non-combatant populations were prizes of war, enslaved and so forth, but not pawns in a political game. Alexander was among the first to use terror in this new way, when he would approach a fortified city and let them know that if they did not open their gates and surrender, when he did succeed in entering the city, he would kill everyone. Fight and all will die, surrender and live.
As a strategy this was somewhat successful, but required that it actually be carried out the first few times, otherwise the next cities to fall would not have believed the treat was credible. It actually saved a lot of people and prevented a lot of battles. This is not to say this is a morally agreeable strategy, but what in war is ever morally agreeable.
World War II was the next really major use of terror. Hitler used it against England, with the continuous bombing of London. America fire bombed Dresden and Tokyo, and then used the atomic bomb on two other Japanese cities. Historians disagree on the effectiveness of these strategies, although it is generally (but apparently falsely) assumed that the atomic bombs were successful applications of the doctrine of terror.
The Cold War was a war of terror on a very large scale. Mostly waged between America and Russia, it put at threat everyone, under the aptly named MAD doctrine of mutually assured destruction.
The wars of the late 20th Century have largely been economic, with the financial elites of the Western democracies using banking practices to seduce, subvert and rule smaller economies to the benefit of their own large corporations. All the same, the threat of military action was always there in the background as well.
These rites of economic and military intimation against essentially powerless people eventually spawned the modern practice of terrorism as a strategy and tactic. If you don't have tanks and bombs, at least you can get your hands on explosives and take your need to fight back directly into the population of your enemy, and cause chaos and fear among the civilian non-combatant population.
It is important to recognize that the spin politicians on both sides give to this kind of warfare is false on its face. The seeming clash between civilizations is a grand lie, mostly fostered by economic elites, who seek to hide their role as a chief cause of the problem. Those urging religious reasons, such as Islamic jihadists, are simply justifying their own ambitions for power behind a distortion of their religion. Neither side tells the truth, and the meek, that is ordinary people who just want to raise children and do satisfying work, are the victims of what is more and more a kind of madness.
For the jihadists, it is easy to find tools (suicide bombers) for their policies among the subject populations, because a people that are cornered in an impossible situation by not only those who they perceive as their enemy, but also by their own power intoxicated leaders, will feel they have no other choice.
But the true fact is that whatever name we want to give to it, whatever doctrine or reason, terrorism remains a strategy and tactic designed to achieve a political end by subjecting non-combatant populations to intimidate in order to force their leaders to change a political course. As such it is among the most dishonorable acts in which warriors can engage. Instead of facing each other, they actually spend more time putting at risk those they claim to be seeking to protect.
The main question is, however: Does this ever work?
History gives little evidence that it does, especially in the present. America's military doctrine of "shock and awe", in the opening battles of the latest war in Iraq, was nothing less than the application of terror on a very large scale. This terrorist doctrine is now being applied by Israel in Lebanon - that is the real target is the civilian population of Lebanon (otherwise why destroy so much civilian infrastructure in either Iraq or Lebanon), while the stated political agenda is this vague and senseless idea that one can make a war on terror.
You can't make a war on a strategic and tactical military doctrine which you yourself apply. The only thing actually going on is a contest of wills among holders of power, whether it is the Western democracies and their strange bedfellow Israel, or the Islamic nations and the jihadists. The war on terror, the clash of civilizations or the need for Jihad are all just excuses for a shared madness among power intoxicated political rulers.
If you take away the spin, and really just look at the unadorned facts, the application of military might to civilian non-combatant populations in order to seek to force political change is not only a policy that doesn't work, but one that is essentially a psychotic self delusional hypocrisy.
We are left with the question: How does the world get this way? The plain answer is that we've made it that way. Each of us participates in this collective madness. The only thing that is going on in the present, is that this madness - this hate and mistrust of the stranger other - has taken on giant dimensions, and represents a conflagration that seeks to consume the whole world. It happens in small scales in families, and as we progress upward toward more complex social forms such as communities, cities, towns, states, nations, peoples, religions and onward, all that happens is that the reasons for this fear gains more and more control over our inner life.
Ultimately, the only thing we can change is ourselves - that is to engage in real spiritual transformation. On that transformation then we can hang acts of sacrifice. But that is a whole other story, one which most folks, if they bother, can work out for themselves.