There has never been a nation called Palestine. The UN did not take an existing country of Palestine and carve out a section and give it to the Jews. Palestine refers to the General geographic area and the name dates from the Roman Times. The term Palestine covered much of what we now call the Middle East, including Lebanon, Syria, Israel, Jordan, and Parts of Saudi Arabia. Palestine as a Nation that encompassed Israel, the West Bank and Gaza NEVER EXISTED.
After WWI the British carved up the Ottoman Empire (that would be the Turks) into regions and created new countries like Iran and Iraq and Saudi Arabia. They made Jordan and Syria. The Brits tried to do the division on tribal boundaries but also used waterways and natural barriers. That is why there have been ongoing wars in places like Iraq and Turkey where the Kurdish population was split. For more evidence of the poor job of partitioning former British Protectorates, look to the seven decade long war between Pakistan and India over the Kashmir Region.
So after WWII, the UN took parts of the British Protectorate like Jordan and Transjordan and divided it up -- that would be the 'partition' part of the creation of Israel (and further evidence the UN has never done a single good thing in its history). Any Arabs (re: Muslims) who wanted to stay in the newly created Israel were welcome. Those who stayed have prospered. The other Arab Nations like Syria, Jordan and Egypt encouraged the Arabs who lived in the Palestine AREA to flee, promising them Israeli Jews would be pushed into the sea.
It fit the Arab political agenda to have a group of refugees and the displaced Arabs -- the ones who chose not to remain in Israel -- were denied access to Egypt, Syria, Saudi Arabia and Jordan. In 1948 Syria controlled the Golan Heights, Jordan the West Bank, and Egypt the Gaza Strip. It was not Israel who made those peoples we now call "Palestinians" homeless refugees.
The following seven decades have seen Israel attacked by its neighbors, most notably in 1967. The Israelis won those wars and the lands they now hold on the West Bank and Golan Heights are part of that victory.
The Obama's idiotic demand that Israel give up land "because I said so" is fantasy. Israel pulled from the Gaza Strip, closed the settlements and in return they have suffered even more terrorist attacks.
When the "Palestinians" can prove they are ready, willing , and able to live in peace, then talks can begin.
PS On a semi-related note read THIS analysis of Obmama's speech. As I have said many times -- Hope and Change indeed.
PSS here is a nice history of the area showing maps for the visual-learning crowd