The United States is in the process of drawing down the number of troops we have stationed there, although that is a slow process. American troops have handed over control of the major cities to the Iraqi Army, and violence, though still present, has decreased greatly.
The Sunni Insurgency has, for the past two years, agreed to fight al-Qaeda in Iraq instead of the US, and we have hired 80,000 of them as soldiers in what is called the "Awakening Councils". This was a spectacularly successful move, as they eradicated most of the terror group in Iraq in about four months in 2007.
The country is in the midst of elections, and the last vote was close, between the current Prime Minister Nouri al-Maliki and a challenger.
The Shia militias (The Mehdi Army) has disarmed for now, and are not pursuing violence, but instead are participating in the election process.
Two of the leaders of al-Qaeda in Iraq were killed by US forces there last week, as reported in the news, so gains are still being made.
The country is recovering, and there is now hope that a stable Iraq can emerge, but they have a long way to go. Most analysts expect an American troop presence of 30,000 - 50,000 for some time to come.