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The fighting in Iraq is all about Iran, mainly the fear Sunni Arabs have for Iran, and its Shia Moslem, non-Arab, often successfully aggressive  culture. Sunni Arabs have always assumed that if the Shia Arab majority in Iraq were in charge, the country would fall under the control of Iran. But Iran will not control Iraq. However, a Shia dominated Iraq might have reason to act in concert with Iran as Shia against Sunni nations. The Iranians have their work cut out for them if they try to go beyond that. The official policy of the Sunni world (especially the Saudi royals), is that the Shia are not heretics. The Sunni radicals disagree. But the Sunni Arab nations of the Persian Gulf have been making nice with their Shia minorities for the last decade. This gives them an opportunity to get the Iraqi Shia on board as "fellow Arabs." Remember, the Iraqi Shia died in large numbers to keep the "Persians" out of Iraq in the 1980s. Even Sunni Arab Saddam Hussein was able to play the "Arabs versus Persians" card successfully. The "Persians" have dominated the region for thousands of years, and have never bothered to conquer Arabia. That's because, until oil was discovered, there was nothing worth fighting for there. But now there is, and that makes the Arabs nervous. A strong Iraq, and an Iran remaining under an arms embargo, would make the Arabs less nervous. A stronger Iran military, and especially an Iran armed with nuclear weapons, is an Arab nightmare.

American troops in Iraq, and Iraqis with access to the Internet (and Western media), get confused when they see what the media reports on what is going on in Iraq, compared to what is actually going on. Take the reports of the worsening trend in terrorist violence in Iraq. Car bombings, al Qaeda's specialty, have fallen from a record high of 170 in April, to 151 in May to 133 in June, with less than 100 in July. In the last two years, American and Iraqi forces have killed or captured over 50,000 terrorists and anti-government forces. While most of those arrested were questioned and released, the areas that are out of control have been greatly reduced. While the mass media like to show video of car bombings, if you look closely you will  notice that, in the background of those vids, you see a prosperous Iraq, with people going about their business. Theres a lot more business in Iraq now. The biggest problems are not terrorists, but common criminals and corrupt government officials. Thus, while al Qaeda and armed Sunni Arabs get most of the coverage, the biggest threats to Iraqs future are hardly covered at all. 

Meanwhile, the government has been making more progress than its terrorist foes.

The leaders of the Sunni Endowment and the Sunni National Dialogue Council, two prominent groups, have essentially endorsed Sunni participation in the national elections.

The United Nations is about to vote to extend for another year the United Nations Assistance Mission for Iraq (UNAMI -- http://www.uniraq.org/), which coordinates humanitarian assistance programs, including economic development funds, support to education, mine clearance, and so forth. 

Syria, to which a good many people associated with the former Iraqi regime, including some of Saddams relatives, has apparently invited these exiles to leave.

Kurdish nationalists have been flexing their muscles not only in Iraq, but also in Turkey, Syria, and Iran. This threatens the possibility of a stable future for Iraq, and the region as a whole. The government, as a result, has gone out of its way to placate the Kurds, and make them feel part of Iraq. But this mood will only work if both sides give ground, and that remains to be seen.