Basically, there was no Palestinian government. Palestine had been part of the Ottoman Empire, and when the British and French carved it up between them after WW1, the Brits got Palestine. However, after significant but relatively minor (in comparison with what was to come) Jewish immigration to the mandate, agitation began as Arabs and Jews clashed. Esssentially, Jewish settlers bought land pretty much fair and square, and were highly successful in settling what had once been desertified and deserted areas of Palestine. In itself this sounds reasonable, but the Arabs were not fools, and knew what large Jewish settlement would eventually lead to (namely a Jewish state in the mandate).
As a result, trouble started, and the British acted to prevent Jewish immigration to Palestine (despite officially supporting the creation of a Jewish homeland). Initially, Jewish groups banded into what were essentially self-defence groups, with the goal of protecting themselves given that the British did not (again, difficult situation). However, soon you had active Zionist groups which took a much more aggressive and violent approach, and who attacked the British in order to get them out of Palestine. Incidents like the bombing of the King David Hotel mean there is a touch of irony about some of Israel's pronouncements on terrorism.
In any event, after a long, hard war of privation and sacrifice, the British were not really interested in being caught between the Jews and Arabs, trying to keep the two apart. The UN was brought in, and essentially a commission proposed partitioning the mandate. The rights and wrongs of the proposed partition are a subject of huge debate, but basically the Jews accepted the proposal, and the Arabs rejected it. When the state of Israel was declared, the Arab nations (Egypt, Syria, Jordan, Lebannon, Iraq, Saudi Arabia etc.) declared war.
The end result was that Israel 'won' the war, not only holding on to the territory allocated to them under the U.N. partition, but greatly increasing the new state's territory. This was largely due to the Arab armies lacking unity, discipline, and their long supply lines. These were relatively new armies, and they just weren't up to the task. Additionally, bloodthirsty Arab rhetoric meant that the Jews felt they were fighting for their lives. Many were survivors of the Nazi occupation, so they constituted a tough and motivated military force.
Probably the most controversial aspect of the war is the idea that Palestinian Arabs were 'expelled'. As with most things in this conflict, the waters are muddy and it is difficult to say anything with certainty. It seems clear that at least some substantial Palestinian 'emigration' took place before the war. These were people who wanted to avoid being caught up in the fighting, but who (like most of the world) assumed that an Arab victory was inevitable and that they would soo return to their homes. However, the single largest factor seems to be the panic and fear created by the massacres committed by the most militant Zionist elements. Although the numbers killed were relatively small, they had a profound effect, as rumour and panic led to many Palestinians fleeing out of fear. The Arabs also comitted some massacres, but as they failed to capture many Jewish settlements or positions, the scope for atrocity on their part was limited. In any event, Arab soldiers proved to be far less bloodthirsty than the rhetoric of their leaders.
That's a bite-sized version of the 1948 Arab-Israeli war. In the modern context, the 6-Day war is probably just as significant. It's all very complex, and the rights and wrongs are not always clear.