Ajdabiya, a city of 140,000, is the gateway to the rebel-held eastern half of Libya and if Gadhafi troops take it, Benghazi would likely be their next target. A powerful regime force advancing from the west has been relentlessly bombarding Ajdabiya the past two days, raining rockets and artillery and tank shells on the city, sending most of its population fleeing.
The loyalists are moving up more units and supplies (as an aside, I'm impressed that the loyalists are using tank transporters) and the rebels are reinforcing the area, too; and while they don't own the city, the loyalists clearly broke through rebel lines in Ajdabiya:
Rebels in Benghazi had sent reinforcements, moving in within a few miles of Ajdabiya and battling with government forces on the eastern side of the city, said a local activist, Abdul-Bari Zwei, and another activist in Benghazi in touch with fighters on the ground in the city.
The loyalists may even hold a road that leads from west to east through the city. But the rebels aren't down. Indeed, the rebels even launched an air strike in support of the rebel defenders.
Again, this city is key to the survival of the rebels. Hold it and they maintain a liberated zone. Lose it and the loyalists can assault Benghazi, advance to the Tobruk region to cut the coastal rebel areas off from Egypt and southern oil fields, or advance south to just cut off the southern oil fields.
But if the loyalists push beyond Ajdabiya to move on Benghazi, as they threaten, and if the rebels can send reinforcements to Ajdabiya to drive out loyalists left to hold the city, the rebels could cut off the Libyan loyalist spearheads and potentially force their surrender from lack of supplies. That would be a tremendous rebel victory.
One way or the other, either in a city in a tenacious defense or by cutting off spearheads that get ahead of their secured supply lines, the rebels need to inflict some heavy casualties on the loyalist attackers. The loyalists simply don't have many troops that they can afford to lose. Even a rebel loss at Ajdabiya could by a Pyrrhic victory for the loyalists if the loyalists lose too many troops to achieve the victory.
In the west, Misrata still holds out against half-hearted loyalist attacks.
Khaddafi still holds the advantage. But a stand at Ajdabiya by the rebels could blunt that momentum. Remember, winning during the war isn't the same as having won the war.