The security services have been warned that the internet is increasingly being used to train terrorists, raise money and as the main form of media to promote radical Islam.
Computer experts in al-Qaeda have created an "online University of Jihad" that is recruiting and training potential terrorists in Britain without them having to risk travelling to camps in Pakistan.
A new generation of encrypted software has been developed called Mujahidden Secrets 2 whose updated security is said to allow militants to communicate freely by email without fear of being spied on by the intelligence services.
At a select conference on the Terrorist Threat to Britain experts from Jane's Intelligence Group said an online community was growing with younger and more impressionable people inadvertently sponsoring terrorism.
Terry Prattar, a specialist in counter-terrorism with Jane's Strategic Advisory Services, said: "Al-Qaeda want to create a University of Jihad on line, both in a spiritual and financial sense.
"They want a community that can carry out attack without having to travel abroad for training.."
He said the internet had been used to raise funds for terrorists in Afghanistan including the use of on-line gambling sites to launder cash.
Youngsters are invited onto security protected areas after they have been recruited by "proving themselves on online forums".
A specialist group calling itself the Al Ansar Media Battalion has used videos of American and British troops being blown up to "make people here feel they are taking part in what going on over there," Mr Pattar said.
An insurgent sniper called Juba who alleges to have killed 140 US soldiers is said to have a substantial following on the Facebook website under the name Baghdad Sniper. It is thought he had since been killed by coalition forces.
The terror groups in Iraq, Pakistan and Afghanistan continue to use Google maps as an information resource for targeting.
Analysts are encouraging moderate Muslims to enter the online discussion sites to dismiss the extremists' arguments that gain popularity among the young.
Security sources have told The Daily Telegraph there was a new battle against al-Qaeda on the internet.
The fight against extremists was one of "ideas, not weapons and a campaign of internet, not training camps'', an intelligence source said.
He described their target as "a 17-year-old who has no criminal record, who sees images on a screen, talks to his friends but never touches a terrorist''.
The European Commission's anti-terrorism unit has promised to tighten legislation across the continent to try to target the grooming of young Muslims for terrorism over the internet.
Under the EU proposals there would be a criminal offence of "public provocation to commit a terrorist offence'', that would include "the distribution, or otherwise making available, of a message to the public, with the intent to incite'' acts of terrorism. The plans would carry a minimum jail term across the continent.
Legislation already exists in Britain to jail for up to seven years those who incite terrorism over the internet.