The word "Sensei" comes from two Kanji (Chinese characters) meaning "before born". In martial arts literature, Sensei is loosely translated to "teacher", "martial arts master" or "master teacher".
The problem with translating "Sensei" simply into the English word "teacher" is that the word "Sensei" carries with it a string sense of respect for one's teacher that is something that is lacking in
the western mind.
It is interesting that one's Sensei may be older, the same age, or younger than the student, but since he or she is the teacher, he or she was born in the art before the student.
Other common terms in martial arts dojos include "Sempai" which is an assistant instructor of a black-belt rank.
"Shihan" is a Sensei who has attained a high rank within the art is an example teacher (his or her life serves as an example).
Another term for a very high ranking Sensei is "Hanchi" which again is an honorary title awarded to the very highest black belt Sensei (frequently a judan or tenth degree black belt). This title signifies a deep understanding of the art. This deep understanding is sometimes referred to as the heart, spirit and soul of the art, or "Kokoro".
"Kancho" is a term which simply means "head of the house". This term implies leadership within the organization.
The other honorary terms used in some systems include "Dai-Sensi" or "O-Sensei" and imply "great sensei". Ueshiba Morihei, the founder of Aikido, was known by his followers as "O-sensei". The founder of Shotokan, Gighin Funakoshi, had a son, Giko Funakoshi, who also was in his own right an important teacher. He was known in his fathers dojo as "Waka-Sensei" or "young Sensei" to distinguish him from his father (it is difficult to have two or more teachers in a crowded dojo who answer to the same title).
Modern karate systems are crowded with individuals who claim to be the "great grand master" of their art. One cannot award oneself an honorary title, these can only be bestowed by one's teacher or by grateful students (to their elderly teacher after years of dedicated teaching).