Why does Israel do it? The answer is pretty simple, because she can. No-one is going to stop her. No-one is going to stand up for the Palestinians because the Palestinians don't have anything that the west wants. The west knows it, Israel knows it and the Palestinians know it.
Today, Israel is imposing a collective punishment on the residents of Gaza in the hope, one assumes, that if Israel punishes the wider Palestinian community enough then they may turn against Hamas or Fatah or the PLO. Its a strategy which Israel clearly has the will, and the firepower, to impose and, right now, Israel seems determined to follow through and raise Gaza to the ground. Given that Israel has already turned Gaza into a prison camp, it must be like shooting fish in a barrel.
Have a look here at 1 hour in Gaza.
And it makes me wonder, what will happen in the future when this new generation of Palestinians grow up and look at the world around them. Will they want to be friends with Israel? Probably not. And, in a few decades hence, when the west is less obsessed with fossil fuels, will America want to anchor its aircraft carriers in nearby waters in case there is another, greater threat to Israel?
Maybe then Israel will need its ultimate deterrent. And, going on the current example, she will be quite prepared to use it. Then the threat will not just be to Israel.