This article is from the Calendars FAQ, by Claus Tondering firstname.lastname@example.org with numerous contributions by others.
The Islamic calendar (or Hijri calendar) is a purely lunar
calendar. It contains 12 months that are based on the motion of the
moon, and because 12 synodic months is only 12*29.53=354.36 days, the
Islamic calendar is consistently shorter than a tropical year, and
therefore it shifts with respect to the Christian calendar.
The calendar is based on the Qur'an (Sura IX, 36-37) and its proper
observance is a sacred duty for Muslims.
The Islamic calendar is the official calendar in countries around the
Gulf, especially Saudi Arabia (but see section 4.5). But other Muslim
countries use the Gregorian calendar for civil purposes and only turn
to the Islamic calendar for religious purposes.