In counter-insurgency, as many have pointed out (here, for ex), our primary goal is to drive a wedge between the attackers and their support base.  The battle is mental and the media / perceptions war is central.   For Americans, victory in this type of conflict is achieved not with a bang but with a whimper - there isn't a climactic battle which can be recounted in thrilling details by news channels and packaged into a future generation's Hollywood blockbuster.   Instead, it's all about being slow and steady and watching the effects of hundreds or perhaps thousands of small interactions eventually sway the tide of battle. 

For example, Austin Bay recently wrote -

There is no time out in war... I see that effort given every day here in Iraq. Check the photo you ran of those two young soldiers from the 81st Brigade (Washington State National Guard). I snapped it, at sunset, right after they had returned from a patrol. I see the same vignette every morning, every evening. The smiles break out despite the fatigue-- and then the troops buckle up and do it again. Blood, sweat, toil and tears: that's not simply Churchillian poetry, that's the price of victory, and it's the product of spine. This peculiar war will take years to win, long, focused years of trial and error, mistake and success, but a breather, a time out?

...In current GI lingo, "the enemy has a vote" (the enemy can exercise his will, and act). Take a break and the enemy votes.

The goal is to hang on, wait for them to simply peter out and thus they can't sustain their anti-government activity.  What makes the Iraq case so interesting is that the anti-govt insurgency there is actually a surrogate for Al Qaeda and Islamic Fundamentalism region wide (once again, if you have doubts about this, I refer you to what they've been saying in their own words - or how about Zarqawi's famous letter?).   Drive a wedge between the Iraqi citizenry and the Islamo Fundies and you've taken the first big step towards driving a wedge between the Fundies and Arabs as a whole.  

With this in mind, StrategyPage reports some promising news -

July 12, 2004: Al Qaeda operations in Iraq have encountered unexpected problems.  Iraqis have become increasingly hostile to the al Qaeda suicide bombing campaign. Religious leaders, which al Qaeda expects to get support from, have been openly denouncing these bombings. Iraqis, aware that they are more likely, than American soldiers, to be victims of these attacks, are providing more information on where the al Qaeda members are hiding out.

...While the Fallujah leadership is intimidated, many residents of Fallujah are not, and are providing information to the coalition, which has led to attacks, with smart bombs or coalition and Iraqi troops, on buildings used by al Qaeda, or other gangs, as headquarters.

...Al Qaeda has found the atmosphere even more hostile elsewhere in Iraq...

...Even Moslem journalists are starting to point out that al Qaeda consistently losses, and tends to hurt Moslems more than infidels. Moslem media is still eager to push al Qaeda as heroes, but the illusion is wearing thin and time is working against the "holy warriors".

Swamp draining at work.