Martial art — it's surrounded by magical charm (7)
I believe the answer is:
jujitsu
'martial art' is the definition.
(jujitsu is a kind of martial art)
'it's surrounded by magical charm' is the wordplay.
'surrounded by' means one lot of letters goes inside another.
'magical charm' becomes 'ju-ju' (I've seen this in another clue).
'its' put within 'juju' is 'JUJITSU'.
(Other definitions for jujitsu that I've seen before include "Japanese martial art" , "Samurai's unarmed self-defence martial art" , "Japanese style of combat" , "Eastern method of self-defence without weapons" , "Self-defence system" .)