It has been oft-suggested that America is currently committing the same sort of terrorist act that we seem determined to punish others for committing. Sanford May asked the excellent question recently (comment #30), "What is terrorism?"
While "terrorism" should most literally describe any act that causes terror, I think we can all agree that we have moved beyond the original etymology of the word. Instead, I tend to think of terrorism as something that is done by individuals or non-governmental organizations (or possibly covertly by governments themselves). When it is done by a government, it's war, not terrorism. I'm not dogmatic about this distinction, though when I actually read the dictionary definition I see that it seems to make the same distinction ("by a person or an organized group") with the added condition of the intention of the terrorists. There may be historical examples that counter this suggestion, but I can't really think of any, so I'm putting it out there for you to consider and discuss.
So according to my suggested guideline, individual suicide bombers are terrorists, while the kamikaze pilots of WWII were not. Political groups that hijack planes and fly them into buildings are terrorists, a military response by a government against those political groups is not. And so on.
One possible additional factor is whether or not civilians are the primary intended target. However, I think that is a common correlation, not a condition of the label. That is, terrorist groups happen to often target civilians for whatever reason, while governments tend to target military groups for whatever reason, but not always in either case. Some acts of war have been actually directed specifically at civilians, while many acts of terror are aimed primarily at military target. Both are sometimes aimed at property rather than people.
Here is why I think that the distinction is important: When a government will own up to sponsorship of war-like activities, a different set of options becomes available. The rules of war then apply (as does the concept of "war crimes"), and most importantly one can largely end the threat by striking decisively at that government or waging some sort of political compromise or even surrendering. When the Axis powers were at war with the Allied powers, each knew who the enemies were, and it was war. Both sides can fight both militarily and politically and they can win or lose according to a relatively predictable (though complex) pattern.