I've seen this variously translated as "Land of Islam", "Realm of Peace", and "Domain of Justice". Well, "land", "realm", and "domain" are all pretty close to each other, and I'd be surprised if the word "Islam" could be translated literally and exactly into English, so there you go.

Anyhow, the term is very precisely defined in Islamic legal rulings; one source says this:
"Dar al-Islam is a territory ruled by an Islamic Amir al-Mu'minin (leader of the Believers, a Caliph that is accepted as such by the consensus of Islamic scholars) under the Jurisdiction of the Shari'ah."1
However, I've most often see it used more loosely, as a rough analogue of "Christendom", referring to the sum of all Islamic-controlled territory at the height of Islamic world power (around something like roughly more or less the ninth through fourteenth centuries, give or take). Perhaps more so than in "Christendom", the Land of Islam was seen as an integral unit, with less cultural emphasis placed on national boundaries than we see in the modern world. In some ways, this sense of things hasn't entirely died out; I've read that there was great sorrow in the Islamic world over the Iran-Iraq War, because they were both Islamic nations.

If I've gotten something wrong here, for God's sake (pick your favorite God) let me know.

1 http://www.rb.org.il/islam/commentary/islamcom16.htm

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