Terror: Intense, overpowering fear. Violence committed or threatened by a group to intimidate or coerce a population, as for military or political purposes.
Terrorism: The use of violence and threats to intimidate or coerce, esp. for political purposes. The state of fear and submission produced by terrorism or terrorization. A terroristic method of governing or of resisting a government.
Terrorism, 1795, in specific sense of "government intimidation during the Reign of Terror in France" (1793-July 1794), from Fr. terrorisme (1798).
"If the basis of a popular government in peacetime is virtue, its basis in a time of revolution is virtue and terror - virtue, without which terror would be barbaric; and terror, without which virtue would be impotent." (Robespierre, speech in French National Convention, 1794)
General sense of "systematic use of terror as a policy" is first recorded in Eng. 1798. Terrorize "coerce or deter by terror" first recorded 1823. Terrorist in the modern sense dates to 1947, especially in reference to Jewish tactics against the British in Palestine - earlier it was used of extremist revolutionaries in Russia (1866); and Jacobins during the French Revolution (1795) - from Fr. terroriste. The tendency of one party's terrorist to be another's guerilla or freedom fighter was noted in ref. to the British action in Cyprus (1956) and the war in Rhodesia (1973).
How to end this conflict? Fighting terrorism with terrorism appears to be a losing strategy for all sides. There are alternatives, though they rarely receive the attention and the financial support that armed confrontations do. Which is not incidentally a result of the increasingly lucrative weapons industry.
Here's an overview of groups and organizations who are attempting to fight terrorism and violence with information, reason and pacifist means.
Women Against Occupation
Adalah-NY: Coalition for Justice in the Middle East
Jews Against the Occupation
Feminist Peace Network
Christian Peacemaker Teams