In Islam, Muslims have three holy cities: Makkah, Medina, and Jerusalem. Makkah is important because they believe that Prophet Abraham and Ishmael built the sacred Ka'bah: The Cube, as a House of God for worship. It is the place where different races come together as one humanity to worship the One God. It is also the birthplace of Muhammed and Islam itself.
Medina: Medina is significant because it houses the Prophetic Mosque. Under the green dome of the Mosque, Muhammed is buried there with two of his closest companions and the first two Caliphs of Islam: Abu Bakr and Umar ibn Al-Khattab. It was the first Islamic state in history when the Muslims emigrated there to escape the persecution of the pagan Arabs and served as the capital and center of the Islamic Empire during the rule of the four righly-guided Caliphs (Abu Bakr, Umar, Uthman ibn Affan, and Ali ibn Abi Talib before the new capital became Damascus under the Umayyad rule (Uthman was from the Umayyad clan). The Prophet's Mosque was built after the Muslim emigration.
Jerusalem: Jerusalem is the third holiest city in Islam. Muslims hold Jerusalem in high esteem because:
1. It is the land of the Prophets. They revere the place because many of the Prophets walked in this land and because Jesus Christ was born it, and it was established as a religious center for the Israelite people under Kings David and Solomon (Dawud and Sulyaman in Arabic).
2. It is the sight of Muhammed's Night Journey from Makkah to Jerusalem when he travelled to the seven heavens to God. Muhammed travelled from Makkah to Jerusalem by a winged celestial creature with the Angel Gabriel.
3. Jerusalem is the site of Al-Haram Al-Sharif (The Abode of Holiness) which houses the black-domed Al-Aqsa Mosque and the golden-domed monument the Dome of the Rock. On his night journey, Muhammed led all the Prophets (Moses, Jesus, Issac, David, Jonah etc) to prayer in Al-Aqsa before ascending to God. After leading the Prophets to prayer he went to the site which is now the Dome of the Rock and ascended to meet God. The Dome of the Rock houses the sacred rock from where Muhammed ascended.
Muhammed's night journey is mentioned in the Quran: "Glory to He (God) Who did take His servant for a Journey by night from the Sacred Mosque (in Makkah) to the farthest Mosque (Al-Aqsa), whose precincts We did bless" (Yusuf Ali's translation).
4. Jerusalem was the first qiblah (direction of prayer) before the Ka'bah was. It was changed because all along the Ka'bah was meant to be a House of Worship for all humanity when Abraham and Ishmael (the father of the Arabs) built it. Jerusalem was the first qiblah because Makkah was still under the pagan Arabs, and there had to be a distinction made to fully establish monotheism in the hearts of Muslim instead of paganism.