I believe terrorism to have three main reasons for existence:
a) It works for some political gain or it's perceived as such by some parties.
b) It's a completely asymmetric form of warfare, much like British General Rupert Smith wrote in his excellent book Utility of Force. Terrorism can't be fought in conventional warfare of state vs state in a battle of strategy, morale and industrial might. The new conflicts require smaller and smaller armies with light equipment and rapid deployment. This has been labelled war amongst the people, since everyone can be a combatant, unlike previous era where uniforms or plate mail would identify combatants from civilians.
c) It's much more doable by groups with small resources and requires little coordination, even less in case of suicide attacks.