American soldiers in Iraq are increasingly finding themselves in the line of fire. But that doesn’t necessarily mean the Iraqi insurgency is gaining more ideological or religious adherents. Rather, it may be gathering steam because of a far more powerful incentive: profit. Indeed, attacks on American military patrols and Iraqi security forces are now a well-financed, fully functioning market—and would-be bombmakers are advertising their services for hire. “The bottom line for these people is not religion or fanaticism, but who is going to help me make ends meet,” says Lt. Col. Ross Brown of the 3rd Calvary Regiment.

For the small, highly skilled teams of insurgent bombmakers in Iraq, the Internet has become an advertising tool. The bombmakers, who normally work in teams of six to 10 people, employ cameramen who are strategically positioned to film their attacks from the most dramatic angles. These digital videos are then edited, set to religiously themed music, and posted on jihadist Web sites or e-mailed in an effort to demonstrate their proficiency. After watching the various bombs at work, larger insurgent groups then hire the bombmakers on a per-job basis, paying between $300 and $1,000 per attack.

The swiftness with which Iraq’s insurgents turned the Internet into an informal, highly effective marketplace has confounded the U.S. military. “It maybe took somebody five years to figure out how to build a new bomb, but once he’s figured out how to build something, he can plug it into the Internet and share that technology very quickly,” says Lt. Col. Shawn Weed, a U.S. Army intelligence officer. Some insurgent groups e-mail streaming video files that contain, for instance, tutorials on how to rig artillery shells and propane tanks as roadside bombs, and how to convert Motorola radios and cell phones into...