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They declared their independence based on military strategy, at a point when they felt confident enough to defeat the Arabs and drive armless Palestinians over the new "border" that they just made up out of thin air. The goal was to grab as much land as possible.
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So now comes to Furqaan's point. Were the Arabs in the right when they invaded in 1948, and then in the 1967? These two failed wars resulted in more loss of land for them!
Anyhow, what I don't understand is, why Israel is permitted to build settlements in the West Bank and Gaza Strip.. And why no one objects (apart from the suicide bombers).