StrategyPage has Gaddafi’s strategy down cold — hunker down in urban areas with human shields:
The urban fighting does not benefit much from the NATO air support, mainly because there are few, if any, NATO air controllers down there to call in the extremely precise attacks required in built-up areas. While Kaddafi has thousands of men with military training, and has then formed into well organized units, the rebels have neither. The rebels are not as united as the Kadaffi forces, and not nearly as effective when attacking (which is always more difficult than defending). Kaddafi troops still have some armored vehicles inside cities like Misarata, which are rolled out when thought safe (from attack) to attack rebel positions, or key sites like hospitals. Kaddafi has his secret police and street gangs in many cities in towns, who are able to harass the rebels, or even defeat them in some places. Kaddafi has cash and lots of promises to give out, and many Libyans with guns will listen.
Reminds me of an old joke from the Bad Old Days of the Cold War.
At the end of World War Three, two Soviet generals are standing on a balcony in Paris, proudly watching their soldiers march in victory down the Champs-Élysées. One general turns to the other and asks, “So which side won the air war?”