Israel is now moving into the second week of a three week military operation. The first week was mainly a bombing campaign to cripple Hizbollah's ability to easily move men and munitions around, and to destroy Hizbollah facilities, particularly rocket storage sites. The air campaign has hit about 1,200 targets so far, including some 200 rocket storage sites. There have been about a thousand Lebanese casualties, less than one per air strike.
The second week has small groups of ground troops going into southern Lebanon to investigate suspected rocket storage sites. This tactic has uncovered those storage sites Hizbollah was able to build and hide from Israeli air and satellite reconnaissance. So far, about half the Hizbollah stocks of rockets have been destroyed, while about a thousands of the rockets have been fired into Israel. It's currently estimated that Hizbollah had some 14,000 rockets, mostly smaller (122mm) ones.
Hizbollah had also trained several dozen teams of men to get the rockets out of their storage sites and launch them into northern Israel. In the third week of the Israeli military plan, more troops will go into southern Lebanon, and Hizbollah fighters killed or driven out. At that point, Lebanon or the UN can be invited to come in and take charge of the area, with some guarantees (a big sticking point) that Hizbollah will not move back. If that doesn't work, Israel has the option of creating a 30-40 kilometer deep neutral zone in southern Lebanon. Several hundred thousand Lebanese civilians have already fled that zone, and may not be allowed back in until something is done about Hizbollah.
The Israeli attacks on Hizbollah military facilities are having an effect, with rocket Hizbollah launches down by more than half (to about 40 today). Israel has several thousand troops in southern Lebanon, and they are going after the Hizbollah rocket launching teams. The Israelis have found that their tactic of dropping leaflets warning civilians to stay away from residential areas used to store weapons, and especially rockets, has worked. Despite Hizbollah efforts for force civilians to stay in their homes, the the vast majority of civilians fled villages and neighborhoods where it was known Hizbollah was storing rockets. Thus most of the Israeli bombs destroyed rockets and housing, not people. The UN has not accepted this, but has bowed to media spin and pro-Hizbollah propaganda, to get behind the terrorists, and accuse Israel of using "disproportionate force." The UN is demanding a cease fire (which, to Hizbollah, is interpreted as a pause before the next round of attacks on Israel). Despite frequent UN rhetoric about the benefits of democracy, they appear to have an imperfect grasp of how it actually works. For example, if a terrorist group were to fire a thousand rockets into any democracy, the citizens of said democracy would demand military action against the attackers, not a cease fire and avoidance of "disproportionate response."