This must be the first and foremost question that comes to anyone's mind when hear the word "Islam", especially for the first time.
"Islam" is an Arabic word which literally means "submission". A person may "submit" to many things around him/her on a daily basis (money, power, people, family, fear, etc...). Yet in the context of religion, it is Submission to the system of the One God.
Islam = Submission to God
Therefore any who follow this natural instinct of submitting to God are called "Muslim".