The Gaza Strip has witnessed some of the most brutal fighting between armed Palestinian factions. The BBC's Martin Asser explains what has led to this situation and what the consequences might be.
Who has been involved in the fighting and why?
Gaza has become the scene of a battle for supremacy between Fatah - a secular nationalist group that has monopolised power since the 1960s - and Hamas, a radical Islamist group which entered electoral politics for the first time in January 2006, when it won parliamentary polls.
Hamas blows up a Fatah HQ in Rafah, southern Gaza
Since the election, the official Palestinian Authority security forces, who are mainly pro-Fatah, and Fatah-affiliated militants, have been in a power struggle with armed Hamas supporters, some of whom were deployed as a Hamas "executive force" to police Gaza.
Despite attempts to negotiate a solution, the rivalry has become increasingly violent, vengeful and destructive. This is especially true between the Hamas executive force and Fatah strongman Muhammad Dahlan's Preventive Security force.
Now Hamas appears to have decisively pressed home its military advantage in Gaza and has taken over pro-Fatah strongholds.
Numerically the Fatah side was stronger, but it appeared to lack central command and morale. Hamas on the other hand is better armed and organised.
The backdrop to the crisis is the poverty, isolation and seeming hopelessness of life in the overcrowded Gaza Strip.
What happens now that Hamas has taken complete control in Gaza?
It is not entirely certain if Fatah and Hamas are passing the "point of no-return" in their power struggle. At the moment the gun-wielding hotheads seem to be dictating the agenda, but politicians may yet rein them in and get back to power-sharing.
Hamas has declared victory in Gaza, and ceded political control of the West Bank to Fatah - bearing in mind that much of it is under tight Israeli military control.
If this split is consolidated, the two areas may set off on different paths - a serious blow to those who want to see a Palestinian state established in the West Bank and Gaza.
However, it is equally possible that Hamas will exert its security control in Gaza - a lawless place that is in dire need of it - and then re-engage with Fatah from a position of greater strength.
Western allies of Israel consider Hamas a terrorist organisation and imposed an embargo when it came to power. So the key question will be to see how Hamas will finance its mini-state and ease the humanitarian crisis in Gaza.
The group's main supporters are Saudi Arabia and the Muslim Brotherhood in Egypt. Iran has pledged financial support, but it is not clear how much of it has got through to Gaza.
What are Fatah's options?
If there is a West Bank-Gaza split, Palestinian Authority President Mahmoud Abbas, who is also the leader of Fatah, could use his better relations with Israel to work towards improved conditions for Palestinians there.
Mr Abbas dismissed the unity government - in which Fatah joined Hamas in order to end the power struggle and get round the boycott.
At the moment, he appears to be adopting strong-arm tactics - boosted, no doubt, by the real possibility of an end to the economic embargo suggested by the US.
He has issued a decree enabling the new Hamas-free government led by Prime Minister Salam Fayyad to rule without the approval of the Hamas-dominated parliament.
Mr Abbas may call new elections but it is difficult to see how that will be achievable under the circumstances, and Palestinian pollsters say the result would probably differ little from what happened in 2005.
What is Israel's position now?
Israel kept on the sidelines as chaos engulfed Gaza and the two Palestinian groups engaged in vicious bloodletting.
But it has welcomed Mr Fayyad's government.
Prime Minister Ehud Olmert said prospects for peace could be boosted by the new development - and Israel regarded such a cabinet as a partner.
Israel has a history of (ultimately unsuccessful) negotiations with Fatah, whereas it has always shunned Hamas because of its long-term goal of destroying the Jewish state.
However, there is little prospect of the powerful Israeli army intervening in support of Mr Abbas, both because of the danger of re-entering Gaza and the fact it would possibly be the kiss-of-death for Mr Abbas.
Paradoxically, the situation may lead to a reduction in the conflict. Israel has always complained that there is no unified "address" when it comes to dealing with the Palestinians.
If Hamas rules supreme in Gaza, that might trigger back-channel talks with Israel, working towards its professed goal of a long-term truce with Israel if it ends the occupation.
But then Hamas may not want to be seen to be "collaborating" with Israel, the very charge it has levelled against elements in Fatah.
If the path to talks with the Palestinians is irreparably damaged, though, Israel may find it expedient to restart work on a deal with Syria - and a new, different era of peacemaking could begin.