The word Jihad represents a concept which is much misunderstood in the West. The concept is explained nicely by the Christian scholar Ira 6. Zepp, Jr. in his book entitled A Muslim Primer on pages 133-135. We adapt from his answer the following:
The essential meaning of Jihad is the spiritual, psychological, and physical effort we exert to be close to God and thus achieve a just and harmonious society. Jihad literally means "striving" or "struggle" and is shorthand for Jihad fi Sabeel Allah (struggle for God's cause). In a sense, every Muslim is a Mujahid, one who strives for God and justice.
Al-Ghazali captured the essence of Jihad when he said: "The real Jihad is the warfare against (one's own) passions. Dr. Ibrahim Abu-Rabi calls Jihad "the execution of effort against evil in the self and every manifestation of evil in society." In a way, Jihad is the Muslim's purest sacrifice: a struggle to live a perfect life and completely submit to God.
Another form of Jihad is the striving to translate the Word of God into action. If one has experienced God and received guidance from the Qur'an, one struggles to apply that guidance in daily life. So the larger, more prevalent meaning of Jihad is the spiritual struggle of the soul. In this case, Jihad is always present for the believer whether there is an external enemy or not. We should never reduce Jihad to violence.
A third level of Jihad is popularly known as "holy war." The classic passage is found in the Qur'an:
Fight in the way of Allah those who fight against you, but transgress not the limits. Truly Allah likes not the transgressors (Qur'an 2:190).
It is crucial to note here that what is condoned is defensive warfare; Islam cannot justify aggressive war. Muhammad and the Tradition are also against killing non-combatants, torturing of prisoners, the destruction of crops, animals and homes. Adapted from Ira 6. Zepp, Jr., A Muslim Primer (1992, Wakefield Editions, US) pp.133-135.
Robert Ellwood of the University of Southern California has the following to say about the Muslim concept of Jihad:
Out of the community ideal of Islam comes the concept of jihad, or holy war, which is designed to defend Islam and allow its social practice, though not to force individual conversions, which is forbidden. Since Islam in principle is a community as well as a religion, presumably only an absolute pacifist would be able to reject the theory of jihad out of hand, since other communities also fight to defend or expand their ways of life. (Many Peoples, Many Faiths by Robert S. Ellwood, 4th edition, Simon & Schuster, US, 1982, p.346).