That region is recognized internationally as part of Georgia but has been in a state of de facto independance since shortly after the break up of the Soviet Union. The people there are neither Georgia nor Russian but historically have been allied with Russia, and most have opted for Russian passports.

Under the cover of the Beijing Olympics, Georgia made a move to reassert control over South Ossetia, but appears to have grossly underestimated the ferocity and the brutality of the Russian response. Didn't Georgia see and learn from what the Russians did in Chechnya?!? Medvedev and Putin are way too hardcore as nationalists to let pass this golden opportunity to pound the crap out of Georgia and increase Russian influence and domination in the region. It's likely that within a short while both separatist regions - South Ossetia and Abkhazia - will be under Russian control and tens of thousands of people will be dead. The Russian leaders are probably chuckling because 1) Georgia was foolish enough to attack first, making the South Ossetians and their Russian allies look like victims, and 2) world attention is diverted away by the Olympics in China. Further, this will weaken the Georgian government, hurt their chances of ever joining NATO, and it has even provoked the sudden and unexpected withdrawal of Georgian forces from Iraq - an obvious sign of panic.

It's a terrible tragedy, thousands will die, and it's the largely the fault of the Georgian government.