In contemporary usage after c.1967, "Palestinian" generally refers to Arab residents, and descendants of Arab residents, of the territory included in the Palestine Mandate -- today's Israel, the West Bank, and the Gaza Strip -- as of May 15, 1948.
Palestine, as an independent, sovereign country has never existed. The land which is commonly or formerly known as the Roman province of Syria-Palestina, formally known as Judaea, in part lies generally within the existing countries of Israel, Jordan, Syria, and Lebanon.
A large percentage of all refugees recognized by the United Nations are Palestinian Arabs. Arab migration began in 1947 when the wealthiest among them left in anticipation of a war, while others left responding to Arab leaders' calls to avoid the path of the advancing Arab armies and the quick destruction of Israel. Had Arab leaders accepted the 1947 UN resolution, there would be an independent Arab state beside Israel. Instead, Palestinian Arabs found themselves caught in the middle of an ongoing struggle between Arab nations and the Jewish state.
This version of events is disputed by Palestinians and by a new generation of Israeli historians, collectively known as the New Historians. There are two important facts left out of the above narrative. First, the area known as Palestine was under Muslim rule from 638 until the collapse of the Ottoman empire after W.W.I. The Zionist movement, which was a political-nationalist movement trying to address the impoverished suffering of Eastern European Jews, did not have any legal basis for establishing a Jewish state in the region until the 1947 UN resolution. This resolution, also known as the UN partition plan, established two states side by side. The international legitimacy of the State of Israel, is predicated on the existence of a State of Palestine. Secondly, while it is true that some Arabs left voluntarily, many other were forcibly expelled by Jewish soldiers. In the 1948 War the Jews expanded their control over many parts of Palestine, that had been allocated to the native Arab residents under the original UN partition plan . The rest of what should have become Palestine, was taken over by Egypt and Jordan (for the most part).
After the 1948 War the UN addressed the plight of the hundreds of thousands of Arab refugees in Resolution 194. It essentially called for the refugees to either be repatriated if they wished to live peacebly with the Jewish citizens of Israel, or receive compensation. A combination of Israel's refusal to accept any culpability for the plight of the usurpation of Arabs from their homes, along with the continued refusal of the Arab states to recognize any right of Israel to the disputed land, prevented the establishment of a Palestinian Arab state. The situation was further exacerbated when in the 1967 War Israel conquered the West Bank and Gaza, i.e. the rest of the territories allocated to the Arabs in the original UN partition.
Instead of taking the opportunity to resolve the conflict once and for all, as some Israeli politicians urged, the israeli government decided to settle Jews in the heart of the Arab territories in the West Bank and Gaza. This was the beginning of the settlement project. From its inception to the present day, there are countries that have declared the settlement project an obstacle to the peaceful resolution of the conflict.
The right of return for Arabs their descendants has been one of the most intractable demands in the ongoing Middle East peace negotiations. Nonetheless, Arab and Israeli negotiators managed to reach an agreement in Taba which created a framework for resolving the issue. Unfortunately, this occurred just days before the government of Ehud Barak was toppled in elections in Feb, 2001. Arik Sharon, who won the election was one of the key architects of the settlement project. Upon coming to power, he immediately terminated negotiations with the Palestinian Authority.
Currently Jordan is the only Arab country to grant citizenship to Palestinian Arabs housed within its borders. Egypt, Iraq, Lebanon and Syria have denied citizenship to Palestinians Arabs. During Saudi Arabia's labor shortage in the 1970's and 1980's, Saudi Arabia rejected appeals to use Palestinian Arabs to fill the labor shortage and instead recruited thousands of Asian workers, mostly from South Korea. During the Gulf War, Kuwait expelled more than 300,000 Palestinian Arabs.
Israel only grants citizenship to the Arabs who live within its borders after the 1948 war. The Arabs who live in the West Bank under Israeli rule have limited rights because of their status as non-citizens of Israel. For a brief period, after the Oslo accords and before the outbreak of the Second Intifada, parts of the West Bank and Gaza were handed over to partial Palestinian self-rule, in what is called the Palestinian Authority (PA). Even during this period, the Israeli military had final say over the movement of Palestinians with the areas ceded to PA control.
Location of current Palestinians (Source: UNRWA -- as of June 30, 2003)
Jordan: 10 camps, 1,718,767 registered refugees, 304,430, registered refugees in camps
Lebanon: 12 camps, 391,679 registered refugees, 225,125 registered refugees in camps
Syria: 10 camps, 409,662 registered refugees, 119,766 registered refugees in camps
West Bank: 19 camps, 654,971 registered refugees, 176,514 registered refugees in camps
Gaza Strip: 8 camps, 907,221 registered refugees, 478,854 registered refugees in camps.
By focusing on "registered refugees," these numbers underestimates the Arab inhabitants of these regions. According to the CIA Fact Book (based on estimates in July, 2004) there are 1,324,991 Palestinians living in Gaza, and 2,311,204 living in the West bank. There are also the Palestinian Arabs who are citizens of Israel. They number around 1.2 million according to the CIA Fact book. All told there are 4.8 million Palestinian Arabs living in territories under the effective control of Israel. By contrast the Jewish population in this region is around 5 million, again using CIA Fact Book numbers.