Democracy is surely not a system that allows government by the people, because in (nearly) all current implementations, government is a very small part of the people and thus separate from it. So what makes democracy “better” than other systems, if anything? The fact that it allows the people to at least choose their government (normally, from a limited amount of options, however).
A regime change in states with dictatorship or similar authoritarian systems is called a revolution (latest example: Tunisia). But not so in democracy. Why not? In my understanding, democracy is a system of permanent revolution1. Just, that these revolutions are formalized, scheduled and intentionally peaceful. Then of course, I would even better like to see democracy as a system of government by the people, concretely, Internet-mediated direct democracy in a network of agile micro-societies that together form one whole nation-state society.
Interesting side note: Karl Popper wrote something about the kind of society in which such “permanent revolution” is possible: in his two-volume book “The Open Society and Its Enemies”, he defines an “open society” as one which ensures that political leaders can be overthrown without the need for bloodshed.” [source]