Two decades after al-Qaeda was founded in the Pakistani border city of Peshawar by Osama bin Laden and a handful of veterans of the war against the Soviets in Afghanistan, the group is more famous and feared than ever. But its grand project -- to transform the Muslim world into a militant Islamist caliphate -- has been, by any measure, a resounding failure.

In large part, that's because bin Laden's strategy for arriving at this Promised Land is a fantasy. Al-Qaeda's leader prides himself on being a big-think strategist, but for all his brains, leadership skills and charisma, he has fastened on an overall strategy that is self-defeating.

Bin Laden's main goal is to bring about regime change in the Middle East and to replace the governments in Cairo and Riyadh with Taliban-style theocracies. He believes that the way to accomplish this is to attack the "far enemy" (the United States), then watch as the supposedly impious, U.S.-backed Muslim regimes he calls the "near enemy" crumble.

This might have worked if the United States had turned out to be a paper tiger that could sustain only a few blows from al-Qaeda. But it didn't. Bin Laden's analysis showed no understanding of the vital interests -- oil, Israel and regional stability -- that undergird U.S. engagement in the Middle East, let alone the intensity of American outrage that would follow the first direct attack on the continental United States since the British burned the White House in 1814.

In fact, bin Laden's plan resulted in the direct opposite of a U.S. withdrawal from the Middle East. The United States now occupies Iraq, and NATO soldiers patrol the streets of Kandahar, the old de facto capital of bin Laden's Taliban allies. Relations between the United States and most authoritarian Arab regimes, meanwhile, are stronger than ever, based on their shared goal of defeating violent Islamists out for American blood and the regimes' power.

For most leaders, such a complete strategic failure would require a rethinking. Not for bin Laden. He could have formulated a new policy after U.S. forces toppled the Taliban in the winter of 2001, having al-Qaeda and its allies directly attack the sclerotic near-enemy regimes; he could have told his followers that, in strictly practical terms, provoking the world's only superpower would clearly interfere with al-Qaeda's goal of establishing Taliban-style rule from Indonesia to Morocco.

Instead, bin Laden continues to conceive of the United States as his main foe, as he has explained in audio- and videotapes that he has released since 2001. At the same time, al-Qaeda has fatally undermined its claim to be the true representative of all Muslims by killing thousands of them since Sept. 11, 2001. These two strategic blunders are the key reasons why bin Laden and his group will ultimately lose. But don't expect that defeat anytime soon. For now, al-Qaeda continues to gather strength, both as a terrorist/insurgent organization based along the Afghan-Pakistani border and as an ongoing model for violent Islamists around the globe.

So how strong -- or weak -- is al-Qaeda at 20? Earlier this year, a furious debate erupted in Washington between two influential counterterrorism analysts. On one side is a former CIA case officer, Marc Sageman, who says that the threat from al-Qaeda's core organization is largely over and warns that future attacks will come from the foot soldiers of a "leaderless jihad" -- self-starting, homegrown radicals with no formal connection to bin Laden's cadre. On the other side of the debate stands Georgetown University professor Bruce Hoffman, who warns that al-Qaeda is on the march, not on the run.

This debate is hardly academic. If the global jihad has in fact become a leaderless one, terrorism will cease to be a top-tier U.S. national security problem and become a manageable, second-order threat, as it was for most of the 20th century. Leaderless organizations can't mount spectacular operations such as 9/11, which required years of planning and training. On the other hand, if al-Qaeda Central is as strong as Hoffman thinks it is, the United States will have to organize its policies in the Middle East, South Asia and at home around that threat for decades.

Sageman's view of the jihadist threat as local and leaderless is largely shared by key counterterrorism officials in Europe, who told me that they can't find any evidence of al-Qaeda operations in their countries. Baltasar Garzon, a judge who has investigated terrorist groups in Spain for the past decade, says that while bin Laden remains "a fundamental reference point for the al-Qaeda movement," he doesn't see any of the organization's fingerprints in his recent inquiries.

But this view is not shared by top counterterrorism officials in the United Kingdom and the United States. A 2007 U.S. National Intelligence Estimate concluded that al-Qaeda was growing more dangerous, not less.

Why the starkly differing views? Largely because U.S. and British officials are contending with an alarming new phenomenon, the deadly nexus developing between some militant British Muslims and al-Qaeda's new headquarters in Pakistan's lawless borderlands. The lesson of the July 2005 London subway bombings, the foiled 2006 scheme to bring down transatlantic jetliners and several other unnerving plots uncovered in the United Kingdom is that the bottom-up radicalization described by Sageman becomes really lethal only when the homegrown wannabes manage to make contact with the group that so worries Hoffman, al-Qaeda Central in Pakistan.

"Hotheads in a coffeehouse are a dime a dozen," said Michael Sheehan, who until 2006 was the deputy New York police commissioner responsible for counterterrorism. "Al-Qaeda Central is often the critical element in turning the hotheads into an actual capable cell." Which is why it's so worrisome that counterterrorism officials have noticed dozens of Europeans making their way to the tribal areas of Pakistan in the past couple of years.

That's a major shift. Until 2006, hardcore European jihadists would have traveled to Iraq. But the numbers doing so now have dwindled to almost zero, according to several European counterterrorism officials. That's because al-Qaeda's affiliate in Iraq has committed something tantamount to suicide.

Al-Qaeda in Iraq once held vast swaths of Sunni-dominated turf and helped spark a civil war by targeting Iraqi Shiites. But when the group imposed Taliban-style measures, such as banning smoking and shaving, on Iraq's Sunni population and started killing other insurgents who didn't share its ultra-fundamentalist views, other Sunnis turned against it. Today al-Qaeda in Iraq is dead, at least as an insurgent organization capable of imposing its will on the wider population. It can still perpetrate large-scale atrocities, of course, and could yet spoil Iraq's fragile truce by again attacking Iraqi Shiites. But for the moment, al-Qaeda in Iraq is on the run, demoralized and surrounded by enemies.

While that's good news for Iraq, there are alarming signs elsewhere. The border region of Pakistan and Afghanistan, an area where jihadists operate with something close to impunity, has become a magnet for foreign fighters. One particularly unwelcome development here: Al-Qaeda Central now exerts a great deal of ideological sway over Baitullah Mehsud, the new leader of the Taliban movement inside Pakistan, who has vowed to attack New York and London.

Next door in Afghanistan, the Taliban have also increasingly adopted bin Laden's worldview and tactics, which has helped them launch a dangerously effective insurgency based on sustained suicide attacks and the deft use of IEDs. And bin Laden's influence extends well beyond the Afghanistan-Pakistan theater. The same mainland European counterterrorism officials who are relieved not to be finding al-Qaeda Central cells in their own countries now worry that bin Laden's North African ally, al-Qaeda in the Islamic Maghreb, may be finding recruits among poorly integrated North African immigrants living in France, Belgium, Spain and Italy.

Al-Qaeda's war for hearts and minds goes on, too. Bin Laden once observed that 90 percent of his battle is waged in the media -- and here, above all, he remains both relevant and cutting-edge. The most reliable guide to what al-Qaeda and the wider jihadist movement will do have long been bin Laden's public statements.

Since 9/11, bin Laden has issued more than two dozen video- and audiotapes, according to IntelCenter, a government contractor that tracks al-Qaeda's propaganda activities. Those messages have reached untold millions worldwide via TV, the Internet and newspapers. The tapes exhort al-Qaeda's followers to continue to kill Westerners and Jews, and some have also carried specific instructions for militant cells. In the past year, for instance, bin Laden has called for attacks on the Pakistani state -- one of the reasons Pakistan saw more suicide attacks in 2007 than at any other time in its history.

Despite al-Qaeda's recent resurgence, I think it highly unlikely that the group will be able to attack inside the United States in the next five years. In the past, al-Qaeda terrorists trying to strike the U.S. homeland have had to slip inside from elsewhere, as the 9/11 hijackers did. No successful past plot has relied on al-Qaeda "sleeper cells" here, and there is little evidence that such cells exist today. Moreover, the United States is a much harder target than it was before 9/11. The U.S. government is on alert, as are ordinary citizens. (Just ask the would-be shoe-bomber, Richard Reid.)

Of course, homegrown terrorists inspired by al-Qaeda might carry out a small-bore attack inside the United States, although the U.S. Muslim community, which is far better integrated than its European counterparts, has produced few violent radicals. And al-Qaeda itself remains quite capable of attacking a wide range of U.S. interests overseas, killing U.S. soldiers in Iraq and Afghanistan and targeting U.S. embassies. But on balance, we have less to fear from al-Qaeda now than we did in 2001.

We would also be far better off if we managed to kill or capture al-Qaeda's innovative chief. So what is the U.S.-led hunt for bin Laden turning up? The short answer is nothing. Washington hasn't had a solid lead on him since radio intercepts placed him at the battle of Tora Bora in eastern Afghanistan in December 2001. U.S. intelligence officials widely assume that he is now in or near Pakistan's tribal areas -- a particularly shrewd hiding place, according to Arthur Keller, a former CIA officer who ran a spy network there in 2006.

Keller told me that al-Qaeda's leaders have excellent operational security. "They have had a Darwinian education in what can give them away, and their tradecraft has improved as we have eliminated some of the less careful members of their organization," he noted. "They're hiding in a sea of people who are very xenophobic of outsiders, so it's a very, very tough nut to crack."

No matter what bin Laden's fate, Muslims around the world are increasingly taking a dim view of his group and its suicide operations. In the late 1990s, bin Laden was a folk hero to many Muslims. But since 2003, as al-Qaeda and its affiliates have killed Muslim civilians by the thousands from Casablanca to Kabul, support for bin Laden has nose-dived, according to Pew polls taken in key Muslim countries such as Indonesia and Pakistan.

At 20, al-Qaeda is losing its war, but its influence will live on. As Michael Scheuer, who founded the CIA's bin Laden unit in 1996, points out, "Their mission is accomplished: worldwide instigation and inspiration." To our grief, that legacy will endure, even after al-Qaeda is defeated.