Ihsan is one of the many words in Arabic that cannot be translated into just one English word but rather has a broad and deep meaning. The primary meaning of the word Ihsan is "perfection" or "excellence," which is related to the word "goodness". Now let us try and get a better understanding from one of the traditions or sayings of Prophet Mohammed; '
Once the Prophet was asked; "what is Ihsan?" to that he replied "[Ihsan is] to worship God as though you see Him, and if you cannot see Him, then indeed He sees you". We can understand from this that it means to do a thing well, in the best possible manner, to achieve excellence, to aim at beauty and perfection.
Ihsan is to be done not only in worship but Ihsan is to be practiced in every aspect of one's life as the Prophet has said: "Verily, Allah has prescribed Ihsan towards everything." However the merit of Ihsan becomes many fold when it is practiced when dealing with fellow human beings.
Treating well with people and good conduct are considered a great virtue in Islam as also the attributes of forgiveness, clemency, compassion and mercy. Conversely the evil attributes of hatred, jealousy, pride and anger are severely condemned and considered to be destructive vices.
In doing Ihsan there is no discrimination of caste, creed and religion as Islam believes in Universal Brotherhood. Ihsan is not limited only to humans but it should be practiced with all the creations of God.
In brief, Ihsan is a labour of love, not merely a duty. This can result only from an inner sense of presence before God and love for Him. Therefore the essence of Ihsan is love of God, and is the pinnacle and highest state of Islam.
It implies the deep attachment, profound love, genuine faithfulness and sacrifice which makes a Muslim identify himself completely with Islam. Not only did the Prophet teach us this with his words, but he also demonstrated to us how to achieve this proficiency in a practical sense as well. He was a role model for us and set lofty examples, one such instance was his complete and unconditional forgiveness of the Makkans who had tortured him (even to the extent of plotting to kill him), his family and his band of followers to such an extent that they were for forced to flee to Madina.
When one practices Ihsan with a heart filled with love of God then the resultant effect on him is that his whole being undergoes such a change that he becomes deserving of the Love of God as the Quran says "And practice Ihsan. Truly, Allah loves the doers of Ihsan." (2:195)