Jerusalem is important to Jews as the historic and traditional capital of ancient Israel. It was captured by King David, the greatest of the Hebrew Kings, and became his capital. It was there that the Temple of Solomon, the holiest site in Judaism was erected. The wailing wall, a remaining ruin from the temple is still there.
For Christians, who share much of their heritage with Judaism, Jerusalem is also important as the historic capital of ancient Israel, but it also marks the place where Jesus was crucified and rose from the dead.
Islam considers it holy as it was from Jerusalem that Muhammad, in a dream, asended from the dome of the rock into heaven before returning to earth.