That practice is called *[transcription][2]*:

> 1.2 A form in which a speech sound or a foreign character is represented:


***Transliteration*** is not necessarily a phonetic operation:

> *[Transliterate][1]*:
> 
> Write or print (a letter or word) using the closest corresponding
> letters of a different alphabet or language:

Because Arabic has a dissimilar alphabet system, جهاد‎ ǧihād [dʒiˈhæːd] comes across as a phonetic transliteration, which is technically *transcription*.

  [1]: http://www.oxforddictionaries.com/definition/english/transliterate?q=transliteration#transliterate__23
  [2]: http://www.oxforddictionaries.com/definition/english/transcription