Recently I heard the term 'wahabism' for specifying a group of muslims . Actually what is wahabism? Is it a sect or normal religious group?
Abdullah (previously Ershad) has given one side of the story (based on what the followers of Wahhabi school claim) and have stated some positive aspects of Wahhabi school.
Every group believes that they are right, often they believe they are completely right with no mistake in their beliefs. Therefore, typically it is almost impossible to find any serious criticism or mentioning of negative aspects and facts about the group in their own writings, let me try to provide another side of the story so hopefully together with Abdullah's answer we will have a more objective view of them. Please keep in mind that some of what I am writing below only applies to more radical Wahhabi Muslims and may not be correct/accurate about more moderate Wahhabi Muslims.
Wahhabi is a recent ultra-conservative fundamentalist movement of Salafi school started by Muhammad ibn Abd al-Wahhab. The followers of this branch dislike being called "Wahhabi", because it designates them as followers of the teachings of Muhammad ibn Abd al-Wahhab while their claim is that they are the true followers of the true Islam (i.e. they are following Islam and other Muslims are not really following Islam). This comes from their belief that unlike other schools they are not interpreting Islamic source and their understanding of Islamic sources is just Islam and nothing more (they typically have a literal reading of Islamic sources).
Wahhabi movement is typically associated with Saudi Arabia, since historically it started there in the 18th century, became dominant through alliance with Al Saud family, it is the dominant practice of Islam in Saudi Arabia, and is strongly supported and promoted by Saudi government.
They believe they have the right understanding of "tawheed" and consider followers of other branches of Islam (particularly Shia Muslims and Sufi Sunni Muslims) to be "muskrik".
For example, as Abdullah confirms, some Wahhabi scholar perform takfir of those Shia Muslims that believe some non-prophets like Ali ibn Abī Ṭālib (PBUH) are above some prophets (PBUT). There are similar cases against Sunni Muslims practicing Sufism for things like celebrating the birthdays of Sufi Muslim saints. I should add that takfir is more than just calling someone non-Muslim, it can have severe consequences: loosing legal rights, loosing property, invalidating marriage certificates, and even permission to kill them as kafir (some extremist Wahhabi groups believe that it is permitted to kill kafirs just for being kafir).
They also destroy historical Islamic sites (sites associated with the prophet and his family and companions) in the name of fighting "shirk". Some Wahhabi scholars even want to destroy "Al-Masjid al-Nabawi". See also this article in the Independent. There does not seem to be any evidence that destruction of graves is a part of Prophet's Sunnah, nor that of four Caliphs following him.
Because of these and similar issues their intolerance towards Muslims who have any difference in beliefs with them many Muslim scholars (Sunni and Shia) consider them extremists. Some scholars see similarities between extremist Wahhabi groups and Kharijites (Grand Imam of Al Azhar University al Sharif Dr. Ahmed Al-Tayeb here, Grand Mufti of Egypt Ali Gomaa, some Shia scholars, and even Saudi Prince Mamdouh bin Abdulaziz).
Sometimes Wahhabi is categorized under Hanbali school of Islamic jurisprudence (figh).
The estimated percentage of Muslims following Wahhabi school is relatively small (less than 4% of Muslims, mainly in the central parts of Saudi Arabia and coastal parts of United Arab Emirates) but according to some reports, they are the fastest growing group among Muslims (this is mainly attributed to the heavy financial support by Saudi government which some estimates put over 90% of total money spent by Muslims for preaching Islam).
I am not sure what you mean by "is it a sect or normal religious group?". It is a movement and a school of thought in Islam practiced by some Muslims.
The term "Wahhabi" is nothing but an outcome of ideological attack by made by media and other sects in their efforts to harm the Call to Islamic Monotheism (Tawheed). It is sad to see some people still want to propagate this myth from what they know from hearsay information. And most probably, they even wouldn't know where the term comes from or what the so-called "wahhabis" call for.
The term "wahabbi" comes from a scholar of Islam named "Muhammad bin Abd al-Wahhaab".
And for the people who say this is something new - No, it is not. Many scholars before him called people to the same thing and long before them the Prophets and the Messengers. Many scholars spoke against plastering of graves like Imam Maalik. Some people who blame him of destroying "historically important" sites/graves would like to see this hadith:
And regarding what people accuse him of rejecting Madhabs and Islamic Scholarship (without any proof), this is my proof that he didn't from his own Book, He said, as occurs in al-Durar al-Saniyyah (1/228-229):
Shaykh Muhammad ibn ‘Abd al-Wahhaab said, describing himself, was:
So he never rejected Islamic scholarship rather he encouraged to take from them and note the bold part The four Imams refers to the four madh-habs.
You should listen to his complete biography explained in this audio.
Muhammad bin Abd al-Wahhaab wrote many books on Tawheed because his focus was on the Monotheism and he was trying to revive it. His interest was to remove shirk (polytheism) which was what the call of the Prophet himself. His books include Kitab at-Tawheed (Book of Monotheism), Kashf ush-Shubuhaat (Removal of Doubts), Masaa’il-ul-Jaahiliyyah(Aspects of the days of Ignorance) and much more. All surrounded the central theme of "Tawheed" (Monotheism).
And one more allegation is made by some people is that the Terrorists and Extremists follows the principles of Muhammad bin Abd al-Wahhaab. These are merely empty claims. These Myths are debunked by scholars and students of knowledge umpteen times in a detailed manner. You can read a detailed article here about the "Wahhabi" Myth and the complete debunking of it. This fact is also mentioned in Encyclopedia of World Biography:
In the name of God
It is said that Muhammad ibn Abdul Wahab ibn Suleiman al-Najdi (1111 - 1206 AH.) has founded this sect. To get familiar with the detailed life of Muhammad ibn Abdul Wahab I invite you to find Wahhabism by Ayatullah Ja'far Subhani. He writes about Muhammad ibn Abdul Wahab:
They are also regarded as a sect of salafis. Hamid S. Atiyyah writes in his "The Wahhabia Movement: The True Image":
Amongst the matters about which the Wahhabis are most sensitive the followings may be exemplified:
1-The Renovation of Graves of Awliya Allah
2-Visitation (Ziyarat) of Graves of Believers
3-Performance of Prayer And Supplication Near Graves Of The Holy Personalities
4-Tawassul (Recourse) To The Awliya Allah
5-Seeking Shafa’a (Intercession) From Awliya Allah
Some more can be found here.
There is a really good article on About.com as well
I hope it helps.