Military strategists often referred to them as "trip wires" against future Arab attacks from invading countries or terrorist attacks.
The green Line (Israel's pre 1967 Borders) were often referred to as the "Auschwitz Lines". This term highlighted Israel's susceptibility to attack from Arab neighbors and the close proximity between Israel's population centers such as Tel Aviv and Netanya to Arab territories.
The majority of Israel's military analysts still hold the view that the "security" settlements are vital for Israel's security and may prevent hostile acts within the green line.
As Israel obtained the West Bank and Gaza Strip as a result of a defensive war. As a country acting in self defense it may sieze territory to prevent any further hostilities.
"Settlements in various parts of the so-called occupied area... [were] the result of a war which they [the Israelis] won." - U.S. Defense Secretary, Donald Rumsfeld

Settlements and Religion

There has been a continues Jewish presence in and around biblical sites holy to Judaism in the West Bank (Judea & Samaria). These sites include: Joseph's Tomb in Nablus, and The cave of the Patriarchs in Hebron.
Hebron is the second holy city for Judaism. Jews were massacred and ethnically cleansed in Hebron in 1929. To deny settlements in Hebron is to condone the forceful transfer of the ancient Jewish community from their land.
Judea and Samaria were part of the biblical land of Israel. It is dicrimatry to declare that Jews may not live there.

Settlements and History.

Jewish settlements had existed prior to the 1948-49 war (Hebron, and Gush Etzion) and were destroyed during hostilities. Under Arab 1948-67 occupation Jews were refused access to their holy shrines and not allowed to live on these lands.

Settlements and Land

The vast majority of settlements in the West Bank and Gaza Strip were built on uninhabited land and have not displaced any Arabs. Jews who have established settlements have worked the land and are therefore entitled to the benefits of their labour. Much of the land was previously left to waste and deemed infertile.
The West Bank and Gaza strip are disputed land and therefore not governed by Israeli law. The Ottoman land laws apply to these areas. Ottoman law states that if the land is uninhabited for over three years it may be purchased.
"The Jewish right of settlement in the area is equivilant in every way to the right of the local population to live there" - Professor Eugene Rostow (former Undersecretary of State for Political Affairs).

Settlements and International Law

Critics of settlements have often cited article 49 of the Fourth Geneva convention, arguing that settlements are contrary to International law. This assertion is incorrect.

Article 49 of the Fourth Geneva conventiuon states:

"Individual or mass forcible transfers, as well as deportations of protected persons from occupied territory to the territory of the Occupying Power or to that of any other country, occupied or not, are prohibited." (Fourth Geneva Convention, Article 49(1)).

There are several reasons why this is not applicable to the case of Israel and the disputed territories.

The articles in question relates to the responsibility of a power that has attained territory as a consequence of an aggressive war. Israel's acquisition of the West Bank, Gaza, and the Golan Heights were as a result of a defensive war.
The article 49 of the Geneva Conventions refers to the forced tranfer of civilian populations. Settlements activity in the territories are voluntary and the local population of the territories have not been transferred not is it Israeli government policy to do so.
The article in question refers to the "occupying power". The West Bank and Gaza Strip are not occupied territories but rather disputed. Previous to 1948 the British were the occupying power of Israel, the West Bank and Gaza Strip but gave their mandate to the United Nations who in tern proposed to partition the land between Israel and the Arabs. The Arabs launched a war against the newly born Jewish state and rejected partition. After the 1948-49 War Jordan, occupied the West Bank and annexed it. The international community refused to recognize the West Bank as part of Jordan. Israel acquired the West Bank from Jordan. The future of the West Bank and Gaza Strip is unclear (UN resolution 242 sates "lands aquired" after hostilities not all lands must be returned) thus making the land disputed not occupied.
The League of Nations which provided for the establishment of a Jewish State specifically encouraged "close settlement by Jews on the land". Article 6 of the Mandate of the Leaugue of Nations states:
"Jewish immigration under suitable conditions and shall encourage, in cooperation with the Jewish Agency referred to in Article 4, close settlement by Jews on the land, including State land not required for public use."

Settlements and Peace

Between 1949-1967 the West Bank was occupied by Jordan and there were no Settlements as the Jordanian government prohibited Jews to live there, no efforts were made by Arab countries or leaders to make peace with Israel.
In 1977 Egyptian President Sadat traveled to Jerusalem. A peace agreement was reached between Sadat and Israeli Prime Minister Menachem Begin. Israel dismantled settlements and withdrew from the Sinai in exchange for peace with Egypt.
In 2000 at Camp David and Taba Israeli Prime Minister Ehud Barak offered the Palestinian leader Yasir Arafat 97% of the West Bank and 100% of the Gaza strip in exchange for peace thus demonstrating Israeli willingness to dismantle settlements in exchange for peace. Arafat refused and initiated violence instead.
The idea that the West Bank and Gaza strip must be a Jew free zone if peace is to be achieved would be deemed as racist if this suggestion was applied anywhere else in the world. There are over 1 million Arabs living in Israel constituting about 17% of Israel's total population. Jews should be able to live in the "Palestinian territories" also.

Other Settlement Facts to Consider

An estimated 80% of settlers live in what are in effect suburbs of Jerusalem and Tel Aviv.
Analyists have noted that 80% of Settlements can be brought into Israel's borders with slight modifications to the "Green Line".
Israel has demonstrated that she is willing to dismantle settlements for peace. Ehud Barak would have dismantled over 100 settlements if Yasir Arafat had agreed to his generous offer at Camp David 2000.
Palestinian violence aimed at ousting settlers from the disputed territories is an attempt to ethnically cleanse the West Bank and Gaza Strip of its Jewish population.