An innocuous-looking former waiter from the Palestinian town of Tulkarm, 11 miles away, entered the room and blew himself up. He killed 29 guests, wounded 140 others and drove kitchen cutlery an inch into the concrete ceiling.

It was the most spectacular and violent suicide bombing that Hamas — an acronym for Harakat al-Muqawama alIslamiya, which means zeal in Arabic — had committed since it was founded in 1987.

With it the Palestinians’ second intifada escalated into a virtual state of war, shocking Israel and prompting Ariel Sharon, the Prime Minister, to send tanks and bulldozers into the occupied West Bank.

Yet as the dust from the five-year intifada clears, the green banner of Hamas — crossed sabres against a map of historic Palestine and Jerusalem’s Dome of the Rock — rises today above the Palestinian parliament building.

The key to understanding how Hamas transformed itself is the dichotomy between how the Islamic militant group is seen by the world, and by its own people. By no means all Palestinians support its agenda, “Islam is the Solution”. And by no means all support its wave of attacks on Israel during the second intifada — in which more than 50 suicide bombings left 430 Israelis dead.

But where the world sees an organisation implacably dedicated to the destruction of Israel, impoverished Palestinian refugees driven from their homes by the creation of the State of Israel in 1948 see an organisation dedicated to ousting the Israeli usurpers.

Where the world sees a group determined to bring down the peace process, its supporters see no peace process to bring down. Where Israel and Washington condemn Hamas as terrorists, many Palestinians see its fighters as armed defenders of an otherwise helpless people vulnerable before the might of Israel’s superpower-funded F16s, tanks and Apache helicopter gunships.

“Why do we have to give up our weapons?” Mahmoud Zahar, the Gazan leader of Hamas, protested to The Times this week. “If Israel comes back to occupy our land, will your country come to defend our people?

“Why do we have to put up our guns while every country everywhere has . . . a strong military in order to protect their homeland, their interests and their people?”

When it decided last year to follow the path of Hezbollah and Sinn Fein from arms to politics, the rhetoric, organisation and sophistication of the political newcomer proved far superior to that of its veteran rival. Where secular, nationalist Fatah assumed that its long history and the iconic figure of Yassir Arafat would overcome years of anger at corruption and lawlessness, Hamas looked to tomorrow. It began laying the groundwork for its victory long ago. Since it was founded in impoverished, conservative Gaza, Hamas has been a social force as well as one for Islamic radicalism.

Realising that he could not Islamise a society without starting at the grass roots, its founder, Sheikh Yassin, set up mosques, schools, soup kitchens, charities and kindergartens long before he formed Hamas, and later its military wing. Its bedrock support is in the refugee camps of the West Bank, Gaza, Lebanon and Jordan, where the angry young grandsons of refugees still harbour hopes, however unlikely, of returning to the long-demolished villages beneath Israeli kibbutzes and shopping malls.

Hamas has little in common with President Bush — except one thing: it never forgets its political base. So it was that Ismail Haniya, the candidate who topped its list, made repeated mention of refugees as he voted in a Gaza camp on Wednesday. “It is premature to say that Hamas is transforming itself into a political party like those in countries that are stable and independent,” he said. “We still have the questions of the Israeli occupation, refugees, Jerusalem and our prisoners. It’s premature for Hamas to drop its weapons.”

But while Hamas refuses to give up its fundamental claim that all of historic Palestine is Muslim land, it has in recent years publicly a compromise.

Under Sheikh Yassin and his successor, Abdel Aziz alRantissi, it offered a long-term cessation of violence in return for an Israeli withdrawal from the occupied West Bank and Gaza and the establishment of a Palestinian state on that land.

Dr Rantissi said that Hamas had come to the conclusion that it was “difficult to liberate all our land at this stage, so we accept a phased liberation”.

Israel nevertheless insists that it cannot trust an organisation whose long-term aim remains its destruction.

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