Now, try explaining this to most people, and they act confused. Moreover, they go, "But we've caught so many of their leaders! How can they be prospering?" Because guys, they don't need a centralized leadership.
The leaders aren't leaders- they're faces. A rallying point, not a commander. And that's a big hazard- kill them or arrest them, and they're still a rallying point. Hell, now they're a _martyr_.
Arrests will not end terrorism. Military actions will not end terrorism. In fact, military actions always spawn partisians. When those partisians move against civilian targets, they become terrorists (as a note, attacks against US troops in Iraq are not terrorist attacks- they are strikes against military targets, and hence, guerilla warfare).
These links ganked from Who Would bin Laden vote for.
