I don't know if you've heard of this, but I find it weird that I haven't seen any coverage on english news sites (or very little).
The other day a grenade exploded in the middle of a "Plaza" in Mexico, and about 100 people were injured and 8 confirmed dead. It was a celebration of the Mexican Revolution day, a rest day and usually very quiet and used as an excuse to party.
This was the incident that pretty confirmed for everyone: "Yep, this is all out war between Drug cartels and Mexican Government, and government is definitely losing".
It was a horrible idea by President Felipe Calderón to declare all out war against mexican drug cartels like the Zetas and all those dudes. Specially since some sources say the president is protecting a rival cartel.
Just to let you know the magnitude of this... Yesterday, these people were executed in various states, in drug-related crimes (vengeance, fights between cartels and so on):
8 in Chihuahua
4 in Sinaloa
2 in Quintana Roo
1 in Durango.
All in one day. And it's been like that for MONTHS. From December 2006 to today, sept 2008, there have been 5, 938 deaths between military, police, drug cartel gang members and innocent people. That's more American soldiers than have died in the war on Irak.
I don't know the names of the cartels but the most famous ones are the Zetas, which were originally an elite squad of mexican military members who were sent to Israel to be trained in SAS / Seal style urban warfare, and then they turned rogue against the government (I suppose they weren't paid enough, or psychological profile was completely wrong for that training). They even had the courage(?) to run radio ads and billboards that basically said "We're recruiting more military personnel!". That was kinda funny and sad.
So you have these sort of super soldiers that know how the govt works running things now, in many states. Police turning up dead, grenades and bazookas and bombs attacking the Police command stations directly in the middle of cities, businessmen with their heads cut off as warnings for the government (Usually the businessmen were related to some cartel, but recently there's more and more innocents involved).
Some cartels are apparently killing the people who pirate things and taking over the business, so piracy benefits them directly. Also, alcohol consumption is controlled by them in the border states (Tijuana and whatever borders the USA), and any sort of night business now needs to pay "Protection". Strip clubs, night clubs, even bars and 24/7 restaurants.
Things have changed in society too. More paranoia, and simple things like road rage can now lead to an encounter with guns. Used to be you could get into fist fights at a club and that's all that would happen, now you might piss off the wrong guy and he'll call his gang and you're dead.
edit: Another thing is now you REALLY can't trust police. The cartels have been confirmed to have duplicated everything about the police, down to the vehicles and uniforms. So you might get flagged down by a police vehicle that turns out to be a gang member.
So this is a really bad time to visit Mexico. I'm honestly afraid to go out at night these days. We went from a pretty safe country to becoming something worse than Colombia at the height of the drug wars, except we have many Pablo Escobars.
It was a stupid, stupid idea of the Mexican president to try a mexican version of the "War on Drugs" (At which I think the USA has failed spectacularly, but that's another thread).
These conflicts are going on on the mentioned states mainly, so if you visit somewhere off to the south(Oaxaca and so on) or the traditional mexican resorts like Cancun, you should be Ok. But I wouldn't visit Durango or Ciudad Juarez, or Sinaloa or any border state for night entertainment.
I wouldn't be surprised if they're already moving into the US...