Lots of folks seem to be having loads of fun laughing at, staring dumbfoundedly on, and speculating on the mental state of, the Iraqi Minister of Information, Mohammed Al-Sahhaf (colloquially known as "Baghdad Bob"). While the amusement is understandable, the amazement isn't.
When you are the spokesman for a totalitarian regime, your goal is not credibility through honesty, but rather credibility through fear--to convince your government's citizens that it is in the interests of their personal safety and security to believe your statements absolutely (or at least to be seen to do so). Baghdad Bob has never been worried about looking stupid or crazy in front of his people, as long as they don't dare say so. In fact, a totalitarian regime actually gains strength by being perceived as powerful and ruthless enough to motivate its citizens to say the most absurd things in its support.
Even in its current dire state, the regime has nothing to lose, and everything to gain, by vigorously asserting Al-Sahhaf's nonsense. After all, he had no credibility whatsoever to lose among those who laugh at him now. And if even a handful of people still believe him--or more importantly, believe the underlying message that the regime is not dead, could survive, and will come looking for anyone who did not behave as though they believed him--those people will cooperate with the forces of the regime, rather than the coalition, and he will have thus increased his own chances of survival, however slightly.
Those who are baffled by his ludicrous bombast are obviously very lucky to have been so sheltered from totalitarianism that its workings are incomprehensibly alien to them. But the less fortunate understand all too well the terrible threat behind the propagandist's clownish lies, and recognize that Baghdad Bob's brand of humor is not absurdist, but rather very, very dark.