Muslims believe that SOME laws are God-given and should prevail all over other man-made laws. These laws are in the form of LIMITS [thou-shall-not-type of laws] established by God. One government or individual should never exceed those limits. In that sense, Muslims believe in theo-democracy. At the top you have immutable limits set by God and under those one can have whatever laws a society deems necessary, as long as those laws do not contradict divine laws.
The current conflict between the Western Powers and Muslim countries is based on the Western view that the US/UK is a force for good and should be the champion of the free world. Muslims see that as western imperialism and want full control of their own territory and resources.