I won't be breaking any news when I say that the Mubarak regime is done. At this juncture, the momentum of the crowd is only accelerating, the army has refused to intervene, and President Obama publicly has called for Mubarak not to run for re-election in the fall. American envoy Frank Weisner demanded Mubarak step down, and was rebuffed, but there doesn't seem to be a pathway for Mubarak to maintain his grip on power. Asymetric warfare theorist John Robb has laid out the victory conditions for both sides. Essentially, Mubarak wins if he outlasts popular anger. The protestors win if Mubarak is forced to flee the country. With public services decaying, the security police discredited and demoralized, and victory close at hand, the protestors have no reason to stop with their central demand unmet. Conversely, there is literally nothing Mubarak has to offer, not promises of stability, not continued terror, only his departure.
EDIT: As I'm typing this, Mubarak has announced he will step down on the next elections. But I'd bet he'll leave well before then.
So what happens next? I'd like to focus on three different issues, Egyptian politics, Israel, and democracy in the Middle East.
I will freely admit that I am not an expert on Egyptian politics. Consensus is that the best organized opposition group is Muslim Brotherhood, but that Mohamed ElBaradei is best situated to step into a leadership role. An internationally renown diplomat, ElBaradei is compromise figure who's stature is his best asset, but who's long separation from Egypt might hinder his effectiveness. The worry floating around American conservative circles is that the Egyptian revolution is a stalking horse for an Islamist takeover, similar to Iran in 1979. This may yet happen, we can't know, but the faster the transition happens, the less likely religious groups will be able to exert a major influence. The chaos and uncertainty in Egypt right now favors people with local credibility, the neighborhood wardens and citizen-bloggers. The more time the situation has to settle, the more secular forces will fragment and the influence of the superior organization of the Muslim Brotherhood will tell on the elections.
If elections were held today, my prediction would be on a roughly 3 way split between secular protestors, the Muslim Brotherhood, and the entrenched military/intelligence forces of the government. While Mubarak may be discredited, a bureaucracy the size of Egypt's security apparatus is not easily dismantled. While a confluence between the Islamist parties, and the military (the Iranian model) is worrying geo-politically, it's not actually my main concern. Far worse for the Egyptian people would be a situation reminiscent of the French Revolution. As the monarchy collapsed, and the National Assembly took power, actual power devolved into the hands of demagogues, who in the name of “defending the revolution” and “punishing tyrants” committed untold atrocities. Now, the world as a whole has far more experience at democracy than it did in 1789, and the Terror was abetted by the efforts of European monarchies to destroy the new republic. There is no better way to turn a revolution paranoid and violent than by attacking it. The lesson here is that the world should offer its unconditional support to the Egyptian democracy in its embryonic stage, even if we do not like the immediate results.
Israel has suffered a major strategic reversal. Egypt, under the control of a geopolitical realist with ties to the US, was an important, if grudging ally. A return to hot war is unlikely, but ElBaradei has already indicated that he would open the Egyptian side of the Gaza border. Israel faces further strategic encirclement. Clinging to the past is not going to work, Israel should bow to the reality on the ground, and hail a strengthening of peaceful relations with the new democracy. While far from a good choice, taking a hard line now will only force worse choices in the future.
Finally, democracy in the Middle East. From Tunisia, the revolution has swept Egypt, forced the King of Jordan to dissolve his cabinet, and has lead to unrest across the region. Will the revolution continue? I have a feeling that if this initial movement were going to spread, it would have already. The emotional conditions, the heat of the moment, is changing. Potential revolutionaries elsewhere are investing their energies in Egypt for the time being. Social networking, a hyper-oxygenated public sphere, allows the flames of revolution to sprout with surprising speed, but other Middle Eastern autocrats appear to have a better grip on the grievances and mood of the people. In the long run, the example of Egypt (assuming it doesn't immediately and obviously degenerate into a theocracy or civil war) should inspire democrats elsewhere in the region. With revolution as a distinct possibility, tyrants must take the grievances of their people seriously, including opening political freedoms.
The system, as it stands, has benefited America, which receives a cheap and reliable supply of oil. However, long term it was clearly unsustainable. Mubarak's government will fall completely within the week. How many dictatorships will last out the year, or five years? Better democracy now, than chaos in an even tenser world later.