Hezbollah, which means "Party of God," was founded in Lebanon in 1982, many say by the Iranian leader Ayatollah Khomeini, as a response to Israel's invasion of Lebanon.
The group's aim is to destroy Israel and to create a fundamentalist Islamic state in Lebanon.
Hezbollah has also become a political force in Lebanon, with 14 delegates in the 128-seat national assembly. But its influence is far greater than numbers suggest.
"They have veto power on the decision-making process and practically today nothing can be done in Lebanon officially without Hezbollah sanctioning it," said Hisham Melhem of the An Nahar newspaper in Beirut.
The group is believed to be responsible for hundreds of attacks against Israel, and for organizing the 1983 bombing of the U.S. Marine barracks in Beirut that resulted in the deaths of 241 Americans.
The group has gained in popularity in southern Lebanon, running schools and hospitals and even a satellite TV channel.
Hezbollah gets most of its arms through Syria, where it has a headquarters, and the group freely admits it gets much of its funding from Iran. Diplomatic sources say the funding includes $20 million to $40 million a month.
Though it is not know whether the current raid into Israel and the capture of soldiers soldiers was done at the instigation of Iran or not, few observers doubt that Iran signed off on the attack.
"This suits Iran's broader strategy as it finds itself pressed by the U.S. and our allies to negotiate over its nuclear program," said Martin Indyk of the Brookings Institute. "To create a side issue."