Power Elite Theory Revised:
Recently, power elite theory has undergone a bit of an update thanks to Thomas R. Dye and Harmon Zeigler's controversial book "The Irony of Democracy: An Uncommon Introduction to American Politics." Their basic thesis is that a small group of power elites disproportionately influences society, that these elites possess a common, fundamentally democratic, value system, and that this value system is not shared by the masses. Thus, the "Irony of Democracy" is that we remain democratic only because the masses are not in control; it is a small, powerful minority that ensures the survival of democratic institutions.
Dye and Zeigler's arguments concerning the power of the elites is more or less a modern rendering of the same arguments advanced by C. Wright Mills, nicely described in the node above. The theory is updated a bit, and, as Wheloc suggested would occur, a few elite groups are added to Mills' initial categories. Most notable among these are the judicial and media elite.
The evidence supporting elite theory should come as no surprise to anyone who's ever been a cynical, pretentious bastard. The masses are ignorant, ill-informed, and apathetic. The elites, but virtue of their influential positions in finance, politics, media, or the judiciary, are able to easily manipulate and coerce the masses. The authors concede a certain degree of upward mobility, but it is slow, generational process. Those eventually making it into the elite sphere become a fully assimilated part of it, instead of bringing in outside influences.
A timely example: Afghanistan. (This is my example, not theirs.) Prior to US deployment in Afghanistan, the average American would be unable to find the country on a map, much less conclude that striking Afghanistan would hamper terrorist efforts. There was a general thought that some form military action was necessary, but the specifics of it was left up to the elites. The hawkish elites happened to be more influential at the time, so we had full-scale military deployment - and a sequel, to boot - rather than Clintonesque surgical missile strikes. In either case the masses have nominal input on the decision-making process. We do not have government by the many, we have "government by the few in the name of the many."
The authors would perceive the debate over military intervention in Afghanistan and Irag as superficial. What is important is that the elites share a democratic value system. They define this value system as private property, limited government, and individual liberty. The various national debates over this issue or that are minor deviations from this fundamental norm, or a matter of prioritizing one of these sometimes opposing values over another. The elites have their disagreements, but they share consensus on the central issues that count. "Disagreements usually occur over the means, not the ends."
This is where it gets really interesting. Dye et al further contend that if the masses were in charge, we wouldn't have a democracy at all: at least not in a form recognizable to us. Instead, we would have the tyranny of the majority. They point to fascinating - and disturbing - evidence that while the masses agree with democratic values in principle, they fail to uphold them in practice.
The authors conclude that, if he were in control, the average Joe would rip up the Bill of Rights. An overwhelming majority of Americans will agree that "People have a right to free speech," but a significant majority will likewise agree that "The Klu Klux Klan should be prevented from holding public demonstrations." Americans agree that "Excessive government bureaucracy is a problem today," but when pressed on a specific agency - EPA, post office, INS - will regard them in varying shades of positive light. There is a disjunct between the ideal itself and the application of the ideal. They also note that the likelihood that those surveyed would respond "correctly" to the questions increases with education and income level, with a majority of those in the stratospheric income ranges - the elites or near-elites - realizing that the Klan has a right to free speech just like anyone else.
The authors are therefore elitist in the vernacular sense of the word as well. They appreciate the fact that the judicial elites enforce the bill of rights over the vague and ill-informed objections of the masses. They appreciate the fact that Ivy-educated policy professionals are the ones making important decisions, not the geography-challenged masses. They appreciate the founders' fear of mob rule and the constitutional protections from it.
Power elite theory is not without its flaws. The intensity of debate within the power elite sphere challenges the notion that there exists an underlying philosophy shared by all elites which is substantively different than that of the greater public. There are plenty of examples of elites constrained by public opinion, as well. Nevertheless the more insular sectors of the decision-making process in this country - notably the judiciary, which is appointed rather than elected, and the business/military/media elite, who are businessmen rather than public servants - closely reflect the observations of elite theory. In fact, power elite theory's interpretation of judicial power is more or less in line with mainstream legal thought on the role of the judiciary: a body that is mostly free from the demands of popular opinion in order to better protect the rights of minorities ie the Ku Kulx Klan.
I strongly recommend you read the book, a truly enjoyable reading experience even if you're not normally into this sort of thing. I picked it up in a high school government class, which gives you an idea of how accessible it is. The book is certainly more readable than the various texts I've come across as a political science major, yet it is substantive enough to be taught in college level courses.