Now we're going into the history of the area, it'd have been better to have stayed with the currant problem, but here's a potted history of the area.
In the beginning, as jno has said, God gave the land to the Jews, so they went and conquered it, driving the original inhabitants (Caananites) out.
The land was called Judea, it split into twin states, Judea and Israel, Israel was wiped out, leaving just Judea, which was conquered by the Romans, who eventually destroyed the country, and drove the inhabitants out.
After the Romans left, approx 300 years after Jesus, until then, there were no Arabs in the country, came Mohamet, who united the Arabs, and went on an empire building spree themselves.
This is how the Arabs came to be there, the Romans had called the land Palestine, which was a mispronounciation of Philistine, (the original Philistines were not of Middle Eastern stock.
From that time, until the formation of the new state of Israel, there was not a country there, until now, there has never been a state of Palestine.
As to who are the rightful owners of the land, I leave that to you, but as I said, thats just a potted history, there's much, much more.