Strictly speaking, this matter depends largely on how one defines the terms "philosophy" and "religion." Webster's dictionary defines philosophy as "love of wisdom," as "a search for a general understanding of values and reality by chiefly speculative rather than observational means," and religion simply as "the service and worship of God or the supernatural."
One can see that neither of these definitions satisfactorily reflects the nature and character of Buddhism. For many people religion is nothing more than a system of beliefs and worship centered around God. These people would consider any system devoid of such a concept unworthy of inclusion into the category of religions, no matter how exalted a teaching it may contain. This is a rather limited view, no longer accepted by world religions. There are great religious systems that do not subscribe to such a way of thinking.
When the Buddha embarked upon his teaching mission, there was never an issue whether he would establish a religion or found a school of philosophy. Such anticipation was simply out of the question. He had realized the Dhamma, overcome Samsara, and achieved Supreme Enlightenment. Foremost in the functions of a Buddha is the exposition of the Dhamma, pointing out the way to lasting peace and happiness for the world. After his enlightenment, he began to share with mankind the supreme knowledge he had attained. There were those willing to listen and who could understand his message. These people benefited from the Buddha's teachings and some of them volunteered to further spread the Dhamma. Others volunteered to provide material support. Those who renounced worldly life became known as bhikkhus, collectively referred to as the Sangha, and took to the mendicant, homeless life. Householders continued to practice the teachings as laymen or laywomen and took on the responsibility of supporting the Sangha. This was how Buddhism evolved and developed. The core factor of all this is the Buddha's teachings, the Dhamma. How people referred to his teachings and the organization that subsequently took shape was never his concern, but he himself referred to the whole structure simply as Dhamma-Vinaya or the Doctrine and Discipline. Clearly, he wanted his teachings to be something that should be properly understood and practiced. He wanted the Dhamma-Vinaya to be a way of life.
A way of life -- that is exactly what Buddhism is. It is not simply a system of beliefs, or a speculation about values and reality, neither is it the service and worship of God or the supernatural. It is a system of noble principles for man to understand and practice; it is Truth.
Of course, Buddhism has all the necessary components to qualify as a religion, and there should be no argument on that point, but one should never lose sight of the fact that the Buddhist religion is fundamentally a way of life -- something that has to do with life itself and the very heart of existence, not simply "the service and worship of God or the supernatural." In fact, this can be said of other religions as well.
Not unlike other great religions, Buddhism also contains many different facets to its system. It is possible to view the same Truth from different perspectives, and our opinions about the Truth may vary according to how we look at it. In the same vein, the names that people attach to the system may also differ in accordance with their opinions about it. Thus one may approach Buddhism through its religious or philosophical aspect, or academically attempt to evaluate its ethical relevance in today's social context, according to one's preference. There are also the psychological, literary, cultural, historical, and other aspects of Buddhism that evolved as an outcome of many interacting conditions in the course of history. But valuable as they may seem, these are of secondary significance compared to its express role as a way of life. [Source: buddhanet.net]
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