It never really changed in nature.
It became technically obsolete when the Caliphate was abolished - as technically only the Caliph could declare Jihad.
In the 18th and 19th century, the Caliph of the Ottoman Empire faced increasing external political pressure for European powers which were advancing technologically far more quickly than the Ottomans, also, their populations grew hugely as a result of the industrialisation of food production and the development of medecines etc.
This pressure meant that the expansionist nature of Islam was contained for a while.
In the late 19th century, with the “crisis” of colonisation by the modern (i.e. European) world, the Islamic world turned away from the doctrine that had failed them - Islam. Where it was retained, concepts were interpreted more peacefully. (If they were not interpreted peacefully, the interpreter was liable to be killed by either European or the Islamic authorities, who were afraid of the European authorities). There are a couple of lines in the ahadith which speak of the “greater Jihad” - the interal struggle against oneself etc. (these comprise c. 3% of the references to jihad in the ahadith and furthermore contradict the Qur’an).
Having tried various other ideologies in the 20th century - fascism, pan-Arabism, communism etc. and found that these failed, many Muslims have returned to Islam as an ideology that can help them.
The basis for modern Jihad rests on the answer to the question: if there is no Caliph to declare Jihad against the kuffar, can Jihad be declared against them?
The salafi answer is that without a Caliph a constant state of Jihad exists (this had significant support in Sharia and the hadith).
Basically the change from jihad as physical jihad happened in the 19th century, after colonisation. The “greater jihad” got prominence then and remains a useful tool for duping non-Muslim marks.
Ask over at faithfreedom.org/forum if you want more information.
