So somebody said we need a place for these people, lets give them the land that these people live on!!
The problem started in the late 19th century when the Zionist movement started with a group of secular European Jews to establish a homeland for the Jews in Palestine. Before that Jews lived in peace with Muslims and Christians in Palestine for about 1300 years (except when the European Crusaders killed all the Jews and Muslims in Jerusalem 900 years ago). Most of the Jews who lived in Palestine till then were Arabs.
When Britain occupied Palestine during WWI, they gave a declaration (Balfour Declaration 1917) to the Jews that they will give them a homeland in Palestine. There was one big problem however: the land already was populated by indigenous Arabs (Mostly Muslim, but with significant Christian 6% and Jewish minorities 10%).
Britain opened the door to Jewish immigration from Europe, which escalated during WWII and after because of the Holocaust. In 1948 the Jews made up 33% of the population of Palestine, but owned only 5% of the land. The UN voted to split Palestine 55% for the Jews and 45% for the Palestinians to establish a Jewish and Arab States in Palestine, and to make Jerusalem an internationally controlled area. War broke out between the Arabs and Jews in 1948 and the Jews occupied nearly 80% of Palestine and established Israel on it. In the process Israel ethnically cleansed 80% of the Palestinians from the land they occupied and destroyed and depopulated more than 400 Palestinian villages, massacred thousands of Palestinians and made 3/4 million Palestinians refugees.
The UN voted in 1948 (Security Council Res. 93 and General Assembly Res. 194) to tell Israel to allow the Palestinian refugees to return to their homes, but until today Israel never complied. In 1967 Israel militarily occupied the remainder of Palestine (The West Bank and the Gaza Strip). The Security Council again voted in 1967 and 1973 that Israel return to the 1967 borders and allow the refugees to return, but Israel never complied (Security Council Res. 237, 242, 338).
This gives you a brief history of the roots of the problem. The Palestinians now negotiate to get only the lands occupied in 1967 back to establish their own state on it, and for Israel to allow the deposed people in 1948 and 1967 to return to their original homes.
Israel is only accepting to return only parts of the lands occupied in 1967. The land they accept to return has no borders with the outside world (making it an effective jail guarded by the Israelis). They also refuse to allow the refugees to return. They also have built many illegal settlements in the West Bank and planted nearly 350,000 Israeli extremists in them. Israel has taken control of nearly 5/6 of the water resources in the West Bank, and has built an apartheid wall that dwarfs the Berlin wall around and through Palestinian cities and villages in the West Bank ( http://chromovision.com/films/Wall.wmv
). They also refuse to return East Jerusalem, which is part of the West Bank, to the Palestinians.
Again this is a very brief background. It in no way describes the daily suffering, abuse, humiliation, terror and deprivation of basic human rights the Israelis inflict on the Palestinians.