Classification

Let me explain the title “Israeli Jew.” If you have permission to live in Israel, you are automatically an Israeli (a citizen of Israel). If you are an Arab living in Israel, you are an Israeli Arab (an Israeli Arab is considered a Palestinian who is a citizen of Israel). If you are a Jew living in Israel, you are an Israeli Jew. If you do not live in Israel or any of the Israeli settlements, then you are confined to the West Bank and Gaza (the areas that compose Palestine so therefore these people are Palestinians). Also, you can be an Israeli Jew and not actually celebrate Judaism, its just a matter of ethnicity. Confused yet? :)
Israeli Jews can go anywhere except for Palestine, therefore the West Bank and Gaza, hence the checkpoints to make sure Palestinians stay in and Israelis stay out. Israeli Arabs (also Palestinians) live in Jerusalem, but have access to the West Bank. Palestinians in the West Bank can only live in the West Bank, but may sometimes travel outside of it to parts of Jerusalem and Palestinians in Gaza are confined only to Gaza (hence the checkpoints to make sure only Israeli Jews are entering Jewish areas and settlements and Palestinians and Israeli Arabs are staying out).
Every person here has a passport and that passport is colored according to your position in society (Israeli Jew, Israeli Arab, or Palestinian). These passports allow the Israelis to monitor more efficiently who can get into or out of designated areas.