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Caliphate (khalifa) literally means "Successor of the Prophet", but the position of primary Caliphate is that of ruler of a unified Islamic nation. It is the goal of Al-Qaeda and the various terrorist organizations working either under the umbrella of Al-Qaeda or in concert with it to fill this void. And if Al-Qaeda has their way, the position will be filled by a Wahabbi Caliphate, Osama bin Laden.
There are three ways in which the Muslim ummah may choose a new Khalifa. However, in all three cases, the people are obligated to give the new Khalifa their bay'a once the process of choosing him is over. People can send representatives to give their bay'a if the population is large. The three ways of choosing the Khalifa are by selection, by nomination, and by force.
1) By selection. The Khalifa is selected by a group of the best, most Islamically knowledgeable people in the society (not by a general vote of everyone). This group is called the Majlis-Ash-Shura (Arabic for "consultative council"). The members of the Majlis-ash-Shura are chosen from experts who are learned in Islam, and they in turn choose the Khalifa. If the society as a whole rejects their choice, the Majlis-ash-Shura must find out why, perhaps negotiate with the people, and in general try to resolve the problem - however, this situation has never occurred. The Majlis-ash-Shura must have at least three people by the definition of a jama'a (a group of three or more people). The Muslim scholar Al-Mawardi has noted that in the emergency case of no Khalifa and no Majlis-ash-Shura (the situation today), the people should create two parties: one being the Majlis-ash-Shura, and the other being a list of candidates for the Khalifa. The Majlis-ash-Shura then selects a Khalifa from the list of candidates.
2) By nomination. The current Khalifa may nominate his successor, the next Khalifa (as Abu Bakr did with Umar). The people have to accept him just as in the first case. If the old Khalifa appoints someone unworthy out of ulterior motives, the people must reject that appointee.
3) By force. If the current Khalifa forces someone on the people to be the next Khalifa, but that person is righteous, the people must accept him as long as he remains righteous. Similarly, if there is no Khalifa (again, the situation today), it is permitted for someone to forcibly seize power and declare himself the Khalifa if he guarantees to abide by his responsibilities under Islam.