Answer 1
Jews are followers of Judaism, a religion. Israel is a theocracy. Its citizens are Israelis.
Answer 2
There is much debate over what Jews are. They are not a religion exclusively because their is a genetic or ethnic component. A Jew who loses his faith is still called an Atheist Jew. A Christian who loses his faith is not called an Atheist Christian. However, Judaism has a number of rituals and beliefs which are categorized under the term religion and a person can convert to Judaism by taking these on. Therefore, most people call it an ethno-religious group. As for Israel being a theocracy, that is patently untrue. Israel has no official state religion, no Rabbis or religious clergy make up parts of the government except as political parties (which every religious leader in every democratic country has a right to do as a citizen), and no segregation or otherwise for non-Jews. Israel is a Jewish State exclusively in the ethnic sense of the term. (Less than 25% of Israelis are actually religious Jews.)
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