Ah I thought someone would bring this old chestnut of the Israel-Apartheid analogy up. Unlike in South Africa under apartheid, Arabs have always had the vote and the right to sit in the Knesset. Its restrictions on Palestinian movement into Israel are highly sensible security wise. Really I think this is a hugely overblown analysis of the situation. Also one that is perpertrated by people who are mainly on the left-wing of politics, like Jimmy Carter (whose foreign policy based upon "human rights" allowed for the coming to power of Ayatollah Khomenei, Robert Mugabe and the Sandinistas).
Israel certainly treats its citizens different based on their religions, but nowhere near apartheid levels. There are well documented examples of the Israeli government giving preferential treatment to Jewish holy sites over the holy sites of other religions, being slow to react to anti-Arab hate speech and violence, having laws like the 'Citizenship and Entry into Israel Law' which disproportionately affect those of Arab birth, and quasi-governmental organizations like the Jewish National Fund which only sells land to Jews. Some of this is understandable, as Israel is set up specifically as a Jewish state, but the question of how much discrimination is too much in a democratic country is still an issue.
Now, the occupied terriories on the other hand are pretty easy to compare to apartheid. They have a different criminal justice system for Israelis and Palestinians in the occupied territories which gives harsher sentences to Palestinians, has extensive well built roads and other kinds of infrastructure only Israelis can use while at the same time maintaining severe restrictions to Palestinian movement, and create Israeli enclaves which are guarded by the IDF which Palestinians are kept out of (see the whole Hebron mess).
