Israel's former ambiguity in its Gaza strategy is gone, and has given way to a much more decisive strategy of total crippling of Hamas' offensive capabilities. Israel is attacking leadership, communications, security, weapons storage/manufacturing, and deployment sites in an effort to turn Hamas into an ineffectual flag-waving organization, rather than a militant wing with any bargaining power.
The commitment to cripple Hamas doesn't necessarily mean it will happen, despite Israel's impressive military. In the past, like the 1982 and 2006 wars in Lebanon, the Israelis have struggled to do serious damage to non-state actors. Israel's regular military, despite the state's security needs, remains largely outfitted to promptly dispatch Arab regular armies. But to be fair, nobody on earth has yet figured out how to properly deal with non-state actors, as the US in the last 7 years has demonstrated. Hamas remains resilient and confident. It is an organization that feeds politically on suffering, terror, mayhem, and death. Its support among its base is likely to harden. What makes life tougher for the Israelis is the constant decision between tactical advantage and strategic caution--Hamas has no qualms with hiding arms in Mosques, hiding terrorists in orphanages and hospitals. Israel must choose between letting them hide out, or killing children, killing the sick, killing religious observers. They seem to be going for the latter.
Israel may be preparing to invade Gaza. Reservists have been called, troops and tanks are lining up by the Gazan border, and foreign nationals are being escorted out of the country. The move may be an effort to pull Hamas security to the border and push civilians away, making it easier to more exclusively target militants, but it may be a legitimate preparation. A ground war is likely to become a mess--unless the Israelis have learned from the Summer 2006 Lebanon war, but chances are (sadly) that they haven't. The most productive thing that Israel can do in a ground war is conduct a series of raids to take down every single Hamas leader whose name registers on the Israeli radar that they can. The only way to truly get Hamas to fall apart will be to rob it so completely of leadership that it kills itself in an internal power struggle. The Mossad may have the intel the Israeli army needs to do that. It's tough to say.
For what it's worth, Israel's friends are sticking by their side. Israel's earlier diplomatic maneuvering is paying off. Egypt is keeping its border crossing closed except for inspected humanitarian relief trucks going into Gaza and inspected emergency transport trucks going out. Egypt has drawn a lot of criticism for this, from the UN and Iran, and from protesters just about everywhere, but it's sticking to its guns. The Lebanese government has come out against criticisms of Egypt, The Syrians have vowed to continue peace negotiations with Israel, and Jordan is keeping quiet despite a 50% Palestinian population. Such reactions are absolutely remarkable, and should mostly guarantee Israel a free hand in the Gaza operation. It remains likely that Livni has convinces Israel's neighbors that Hamas must go.
So with its free hand, Israel continues to pound Gaza, targeting as many Hamas critical points as they can. Hamas remains bold, but nothing Israel can do will change Hamas' rhetoric. Keep an eye out for a Gazan land war, and for more Hamas leaders to turn up dead. Israel may have a unique opportunity to eject this thorn in its side once and for all.