Terrorism is an extreme form of intolerance combined with a fanatical desire for retribution of perceived wrongs.I would say that terrorism is sometimes used by those with extreme intolerance and fanaticism, but I would like to propose a more general definition:
Terrorism is a military tactic, generally utilitized by organizations having no possibility of victory in a conventional or nuclear military conflict. As with all military tactics, the goal is to "defeat" the enemy, in other words to cause the enemy so much pain/cost that they become willing to take some action deemed important by the organization utilizing terrorism.
Terrorism usually (but not necessarily) contains a component consisting of violence directed at civilians. As such, it can generally only be used against populations that consider it highly immoral to intentionally kill civilians, even in military conflicts. If this were not the case, the attacked population, with its superior conventional military strength, would simply exterminate the population (civilian, military, and terrorists alike) partaking in, and supporting, the terrorist tactics.
I personally have difficulty distinguishing between terrorism and guerilla warfare. Since I have personally worked on weapons systems that have been deployed in Iraq and Afghanistan, I consider myself a perfectly legitimate military target, even though I've always been a civilian. In addition, the United States has intentionally attacked civilian populations several times (Hiroshima, Dresden, etc.), so clearly, it's a common conventional military tactic as well.
Osama's goal in using this military tactic called terrorism, is to destroy the West. And indeed, he considers that retribution of perceived wrongs. Those perceived wrongs extend all the way back to the crusades of the 12th century (he's mentioned those several times in his rambling video tapes). If he has his way, we will either all be dead or be muslims ruled by a caliphate headed up by Osama. As an interim step, he would probably accept that we completely leave all muslim countries and allow Israel to be destroyed. I don't see any realistic way to placate him, so we will have to kill him and his followers. Unfortunately, as Jim points out, military response to terrorism often seems worse than the disease, as it "tends to spread more intolerance even within the society that responds as well as within the receiving faction." So Osama may be able to bring down western civilization: if we don't respond, we're sitting ducks (for example, 9/11); if we do, we fan the flames of hatred and intolerance (for example, Madrid). Bummer!