The action around Falujah has turned into something of a classic siege, except that the main road (from Baghdad to Jordan) that goes through the town, is still in use as American smart bombs hit targets each day, and night, and American troops raid compounds and houses in the suburbs. Abu Musab al Zarqawi's terrorist organization, which is responsible for most, if not all, of the suicide bombs going off in Iraq, has concentrated most of his men in Fallujah. But the locals, unhappy with al Zarqawi's men (they tend to have an attitude) and the suicide bombs (which kill mainly Iraqis) keep passing on the locations of al Zarqawi hideouts, which get bombed. As a result, al Zarqawi's guys have been running around accusing and killing "suspicious" locals, further diminishing the popularity of the al Zarqawi crowd. In an attempt to get away from the smart bombs, many of the hundreds of al Zarqawi followers have taken over homes in the outskirts. But these moves were noted and reported, which led to smart bombs, and some raids by American troops which has captured some of the al Zarqawi followers.
Abu Musab al Zarqawi has something of an inflated reputation. He was never very successful as a terrorist in his native Jordan. He fled to Iran, where he worked with the Kurdish al Qaeda group Ansar al Islam. This bunch caused some trouble in northern Iraq, along the Iranian border. But then a combined American Special Forces/Kurdish operation broke up Ansar. Some of these terrorists are still around, but they are no longer much of an organization. After than, Abu Musab al Zarqawi went south, and, fell in with the Baath Party crowd and organized the al Qaeda volunteers pouring in from neighboring Arab countries. These included a few people who knew how to rig bombs, but no one who knew how to penetrate the security of coalition military camps. So al Qaeda came to be a very unpopular organization in Iraq, because most of their bombs were killing Iraqis.
Osama bin Laden considered Abu Musab al Zarqawi second rate, and that assessment was apparently accurate. Al Qaeda is reduced to using people it had previously dismissed, and killing the same people it appeals to for support.