Introduction
Deterrence is an attempt to stop wars before they occur. The basic idea of deterrence is that you make a potential opponent think twice about his decision to take you on, and make it so that during this second consideration he will conclude it is not worth the risk. We are used to associating this idea with the Cold War and nuclear weapons, but in fact it operates just as much in scenarios involving conventional (that is, non-nuclear) forces; and it is this aspect which is most relevant, because few conflicts have a real risk of going nuclear.
Nuclear deterrence
To be traditional, I shall start with nuclear deterrence. The basic idea of nuclear deterrence is that one develops a nuclear capability which is so fearful to one's opponent that he will never use nuclear weapons against you in the first place. To be credible, nuclear deterrence has to encompass what is called a "second strike" capability; this means that you have to be able to absorb a surprise nuclear attack by your opponent and still be able to respond with enough force to deter him from attacking in the first place. Countries often accomplish this by putting nuclear weapons on submarines, so that even if their homeland were totally obliterated they would still be able to respond.
Nuclear deterrence has been in large part responsible for the remarkable peace that has obtained between the superpowers and in Europe for the last sixty years. Despite all the conflicts of the Cold War, U.S. and Soviet forces never came directly to blows; rather, their decisive conflicts were fought internally, trying to outdo one another in social and economic progress. This was because the idea of a war between the two was inconceivable as it would have led to mutually assured destruction, a lesson that was clear in theory since World War II and in practice since the Cuban missile crisis.
Europe survived unmolested by Soviet forces under the American nuclear umbrella, and conflicts were deflected to formerly obscure parts of the globe like Vietnam, Angola and Nicaragua. Although disastrous for the peoples of these countries, these conflicts never ultimately meant enough to either superpower for the use of nuclear weapons; they would rather lose a war than deploy a nuke. Such was the power of nuclear deterrence that both the U.S. and the Soviet Union feared using a nuclear weapon in any circumstance whatsoever, because to do so would break the greatest taboo of international politics; and to break this taboo would cheapen it and make a global nuclear confrontation between the superpowers more likely.
In a perverse way, it can hence be said that nuclear deterrence between the superpowers worked during the Cold War. A bipolar system with two main nuclear powers was remarkably stable, and spared Europe at least from the major wars that have been its lot throughout history. The question the world now faces is whether nuclear deterrence continues to operate with many more poles. There are now many more nuclear powers, and it is only a matter of time before there are more. With this proliferation into the hands of less responsible regional actors, there is a much greater chance that nuclear weapons will fall into the hands of a regime that is not rational enough to recognize the validity of deterrence theory.
The risks of this are great because once a nuclear weapon has been used by anyone, there is a risk that the idea of their use will be cheapened. History has repeatedly shown that multipolar systems are more unstable because there are more points of contact between countries and more opportunities for something to go wrong. The extreme idea that if every country had a nuclear weapon then there would be peace - because no-one would dare to go to war - is the opposite of the truth, for this only increases the chance that the system will break down. And when it breaks down, the results can be catastrophic, as Europe witnessed during World War I after the breakdown of the incredibly complex system of alliances and relationships between its heavily armed powers.
Which brings us neatly to conventional deterrence.
Conventional deterrence
Conventional deterrence is much like nuclear deterrence, but it does not involve the "silver bullet" of nuclear weapons. Conventional deterrence is the basic idea behind non-nuclear arms races - countries try to develop such sophisticated and powerful militaries that no-one will mess with them. However, this instantly creates a problem because any country trying to develop a more powerful military than its neighbours becomes an object of fear; whatever their protestations about the defensive nature of their endeavour, their intentions will be viewed with suspicion. And even if they really do only have defence in mind, their neighbours can never have be sure what future leaders of the country might desire - capability matters more than intent in these matters. This is called the security dilemma: increasing one's capacity to defend oneself makes one more liable to be attacked.
This is especially the case in complicated situations where many countries are involved, as this is likely to lead to a situation of constant intrigue in which alliances and blocs are formed as each country tries always to remain in the strongest position. This was the situation that obtained in Europe for most of its history, and contributed to the spectacular miscalculations that caused World War I. But since World War II, conventional deterrence has been relevant largely to one single country, the one with the military capability to take on just about any imaginable bloc of countries - the United States.
The United States and deterrence
Because of the enormous taboo against the use of nuclear weapons, the United States has also felt it necessary to maintain a massive conventional deterrence. Potential enemies of the U.S. do not seriously fear being nuked because their crimes would have to be almost inconceivably great to receive this punishment; but they do fear the conventional might of the Pentagon, which can be applied much more flexibly. The maintenance of this absolute global conventional deterrence is the most highly-prized aim of the neoconservatives, who want potential opponents to U.S. hegemony to not even think about bothering to try and become a challenger.
The enormous conventional might of the U.S. might create instability when it is misapplied, but it also creates a large zone of peace in the world. As the U.S. has the goal of remaining the predominant military power in every region of the world, it views potential challengers with suspicion; it was the application of U.S. conventional power that stopped Saddam Hussein conquering a large part of the Middle East, and that keeps North Korean forces out of the south. U.S. forces have also contributed massively to keeping the peace in Europe, where they have made remilitarization and potential conflicts unnecessary; they have of course had the same effect in Japan.
The maintenance of this deterrent capability - essentially, the fear of U.S. military power - is why there is an incredible fear in Washington of ever being seen to lose a war. If the U.S. military can be defeated in one place, then potential enemies might conclude that it can be defeated in another. If U.S. military preponderance breaks down, the world would become more more chaotic; at the moment, countries with territorial ambitions have to take into account the potential reaction of the U.S. to their actions. If they did not, they might prove much more willing to cross borders. Like the threat of nuclear annihilation, the threat of conventional annihilation by the U.S. military acts to perpetuate the status quo all over the world and prevent wars between states.
Conclusion
Where deterrence fails to operate is on the margins of the battlefield, in civil wars and insurgencies and among terrorist groups. No-one has ever argued that the U.S. military is infallible in combating insurgencies and terrorist groups, as they lack the definitive addresses that precision-guided munitions require; and while this does little to reduce the fear felt by states and armies, it creates a problem that deterrence is ill-equipped to handle. To combat this threat, which looks set to define the 21st century, the U.S. will have to move beyond fear.