The Israeli Democracy Institute (IDI) this week published their annual survey on democratic practices in Israel, which characterizes itself as both democratic and Jewish. But as Israel's Arab minority grows – already it accounts for 20 percent of the population – the compatibility of those dual ideals is being challenged.

Here is a look at this minority and its place in Israel today.

How big is Israel's Arab minority?

During the 1948 Arab-Israeli war, the overwhelming majority of Palestinians were dispersed throughout the Arab world – either by fleeing or being forced out. But about 150,000 Palestinians remained inside Israel. Today, they and their descendants number 1.5 million, or 20 percent of Israeli citizens.

Palestinians who live in the West Bank and Gaza Strip – many of whom are relatives – refer to them as the "Palestinians of '48."

Israelis refer to them as Israeli Arabs. They are separate from the Palestinians of East Jerusalem, who refused Israel's offer of citizenship after it captured the territory in 1967 in an act of annexation that was condemned by the United Nations Security Council. Instead, they became permanent Israeli residents.

Are they equal in Israel's democracy?

Israel's 1948 Declaration of Independence promised "full and equal citizenship and due representation" for Arab citizens of the state. Today, Israeli Arabs enjoy voting rights and welfare benefits similar to those of Jewish citizens. But none of Israel's national symbols, such as the Star of David flag, represent their heritage.

The original paradigm of relations was based on a mix of civic and individual rights, integration, and quasi-autonomous rights in education and religion. But they faced discriminatory government policies, says Elie Rekhess, former adviser to the Israeli government on Israeli Arab affairs.

"It's a restricted equality, because in certain areas Jews and Arabs are not equal, emanating from the fact that Israel is a Jewish state and there is no such thing as an Israeli nationality that is all inclusive," says Professor Rekhess, now at Northwestern University in Chicago. "The paradigm is falling apart."

Arabs make up much of Israel's underclass. They are underrepresented in government as well as business. Arab parties have never been part of the ruling coalition government. Not until 2004 was an Arab appointed to a permanent spot on the Supreme Court. And only in 2006 did Israel see its first Arab minister in government.

Among the findings of the IDI survey released this week:

Only 51 percent of Israelis said that Jewish and Arab citizens should have equal rights.

62 percent of Jewish respondents said that Israeli Arabs' views on security and foreign affairs should not be considered so long as Israel is in conflict with the Palestinians.

53 percent said the state has the right to encourage Arabs to emigrate.

33 percent supported putting Arabs in internment camps if war breaks out.

Are Israeli Arabs loyal to Israel?

Arab citizens pay taxes to Israel, send their children to Israeli schools, and vote for the Israeli parliament. But they also sympathize with Palestinians' struggle for an independent state and an end to Israel's military occupation.

"This is their biggest dilemma," says Yoav Stern of the Peres Institute for Peace in Jaffa. "They are trying to avoid the contradiction between them being part of the Palestinian people, and their Israeli citizenship."

In a 2009 Haifa University survey, 24 percent of Israeli Arabs said they would prefer to live in a Palestinian state and 14 percent supported the use of violence as a means of protest. But the vast majority remain loyal to Israel.

"We are fighting for our rights within the law," says Jacky Khouri, a news director at the Arabic radio station A-Shams. "Our struggle is democratic and legitimate, and we are not in any way part of a violent struggle, either within the Palestinian Authority or any armed group in the Arab world like Hezbollah."

How do Israeli Jews view them?

According to the Haifa University survey, some 79 percent of Israeli Jews support Arab citizens receiving full civil rights. About 3 in 5 support a government program to help close the gap between Arabs and Jews.

But only 1 in 3 are willing to consider changing Israel's symbols to give expression to Arabs. Many view them with suspicion. Some 73 percent agreed that a citizen who considers himself a "Palestinian Arab in Israel" can't be loyal to the state.

There are a growing number of right-wing Israeli politicians who openly question the loyalty of Arabs to the state. Foreign Minister Avigdor Lieberman's success in the 2009 elections has largely been attributed to a campaign promise to require a loyalty oath for Arab citizens.

The bill has so far failed. But on Oct. 10, Prime Minister Benjamin Netanyahu's government voted to amend the country's citizenship law to require any prospective citizens who are not Jewish to swear allegiance to Israel as a Jewish and democratic state. While the measure, which still needs to be approved by parliament, does not affect Arabs who are already citizens, they see it as fresh evidence that there is a conflict between Israel's dual identity as Jewish and democratic.

But after Jews endured millenniums of persecution before finally establishing a state of their own, some Israelis do value their state's Jewishness more than its democratic character.

"Most Jews continue to see Palestinian identity and ties as subversive and to prefer the Jewishness of the state over its democracy," wrote Haifa University political science professor Sammy Smooha in an overview of the 2009 survey. On the other hand, "[the] Jewish majority realizes that in its midst lives an Arab minority permanently, and it has to come to terms with [it]."

Why is their status increasingly urgent?

Higher birthrates and rising demands for Arab autonomy challenge Israel's ability to be both Jewish and democratic. Professor Smooha's study found that 48 percent of Arab citizens are unhappy with their lives in Israel, compared with 35 percent in 2003. While nearly two-thirds believed in 2003 that Israel's democracy empowered them as well as Jews, last year only half agreed with the idea. Voting turnout dropped to 53 percent in 2009 from 75 percent in 1999.

Rekhess, who warned of the potential for violence shortly before the second intifada started in 2000, said there is ample potential for another flare-up. "The ground is burning. All you need is something to ignite it."