Many others have covered this topic here very well so far, but I will throw in my perspective.
This does present a bit of a conundrum or paradox.
1. Is the "Martial Art" just about fighting, and success in battle (or street defense)? If it is, then why do we need all of the other attachments (eg: philosophy, uniforms, belts, forms, terminology, ethics, etc).
2. If we teach avoidance of conflict as a preferred choice, then future students would become void of any real-life combat experience, thus would they make good instructors and be able to teach new students how to fight effectively?
3. If an instructor is suggesting to their students that what they are learning will be effective in the street, how do we know this is true if that instructor has not used it successfully themselves.
As to issue 1, I think each of us have to decide what we believe the accurate definition, and purpose of the "Martial Art" is. I do hear some say, "why do we need Martial Art to learn philosophy, or manners, or ethical behavior? You can get that elsewhere. Well, the same is true about fighting. If your main concern and focus is winning a street fight, and survival against any and all attackers, then you don't need to even use the term "Martial Art." Just learn to fight from whatever source you can find. After all, you are not after anything other than survival, right?
In the U.S., we have a coin used for tossing (usually a quarter). On one side is the "heads" and the other side is the "tails." In my view, the Martial Art is something like this. "Heads" is what you know; what you think; what you understand; what is your philosophy. "Tails" is "can you protect your butt in a real situation?" You can focus on one or the other, but that would be out of balance with life, nature, and the universe. If you stand a coin on its edge, it is neither heads nor tails. Here, you must gain the insights, wisdom, and enlightenment to know which side of the coin to use at any given time.
As to issue 2 and 3, how can we teach non-violence, yet remain effective teachers? This might not be possible (paradox?). Consider this analogy. If someone long ago in history was an expert swordsman, and killed many opponents in combat. Then, they developed a system of teaching how to cut inanimate objects with a sharp sword, and how to spar with wooden swords and protective gear. Students will be able to effectively combine the two skills (technical knowledge of cutting correctly, and out maneuvering an opponent in combat), thus will have the ability to fight as well as their teacher without ever having been in combat themselves (agree or disagree?). If I am very skilled at cutting bamboo, and can beat any classmate with my boken or shinai, should I feel confident that if an opponent attacked me with a sword that I could kill them, or do I need to kill several myself to be certain?
One thing to consider is this. There are those who think and act in the moment, and those who plan for the future. For example, "Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a life-time." If you are skilled with a sword, fighting and winning at the critical moment is all that is important - - for the present time. Most swordsman know enough to keep their sword clean so that it will last them a long time, hold up in battle, and be easier to draw from its scabbard.
Maintenance, and long term planning is important to Martial Art training - not just physical skill and ability, but sharpness of mind, awareness, being calm and cool, and a whole world of philosophy that helps mold, and forge a true master of the art. If you have a pond with fish in it, and you are hungry, you could eat all the fish you want, and be full every day. However, if you are not careful and you eat the last fish, you might die of starvation. People must learn to manage their resources, and be able to find other food to eat.
In my opinion, "Martial" is fighting - - it is what you do today to defend yourself. "Art" is what you do to refine your skills, improve yourself, prepare yourself, and preserve the knowledge for future generations. It means not burning your bridges, not placing an "x" on your back as a target, and not focusing on only one side of the balance of nature.
Many will acknowledge that their primary concern is protecting themselves, their spouses, and their loved ones at all costs. If the situation is there, and you must act, then yes - by all means, do what you must. However, what sense does it make if you place yourself in a potentially lethal situation just to gain experience in fighting, or to beat up a bully. Avoiding conflict can save your life and keep you alive to protect your wife and kids another day when it is absolutely unavoidable. If that day is today, then do what you must.
The Spiderman analogy is a good one, which is why I often intervene and act against a bully, thug, or thief. Because I can, and I would rather it be me that this person has to encounter than to avoid him and his next victim be a child, an elderly person, or any weaker innocent individual. However, I have trained to know when it is safe, and when I should avoid the dangerous scenarios. I can still scare the person off, get a good description and call the police, but I do myself and my family no good if I get killed when I can prevent it.
A man who cuts off his nose to spite his face is a fool.
A man who starts a blood-bath with a local gang knowing they will target him and his family is a fool.
A man who wins the battles while setting himself up to lose the war is a fool.
The Martial Art is about winning today, as well as tomorrow. It is about surviving this battle as well as the next, and subsequently winning the war. It is about contributing to your environment in a positive way knowing that what goes around comes around. It is about all the things the make success in life, and in combat more likely, which includes promoting peace, but being prepared to deal with violence; teaching and living with ethics, while accepting that it often takes the real threat of violence, and occasionally violent acts to reach the peace on the other side. Create discord in your life, and your life might end abruptly. Live violently, and violence will follow you wherever you go.
These are my opinions formed through experience. It is not my word that makes these things true (if, in fact, they are true) - - it is nature that makes it true.
What good is taking your opponent's pawn, if it means they capture your king.
What good is landing a punch if it means your opponent slices open your throat.
What good is winning this fight today, if it means you lose the fight tomorrow.
What good is being the "best fighter" if a hundred worst fighters gang up on you because of your attitude, arrogance, or unethical behavior.
Yes Stevie, but can he fight?
Yes, he can fight, but can he teach you to fight?
Yes, he can teach you to fight, but will he teach you when not to fight?
That is the mark of a true Master!
Know this:
Being a regular fighter, does not make you the best fighter.
Being a well-known fighter, does not make you the best fighter.
Winning countless battles in the street does not make you unbeatable.
The most dangerous fighter who should be the most feared and respected, is the one you would never suspect would ever win a fight.
The most deadly master and greatest warrior....... you have never even heard of.
CM D.J. Eisenhart
Thought I was pretty bad at one time. Then the little skinny guy on a horse-dose of drugs got hold of me. My arrogance and 'street record' was my downfall. 
