Mercenaries have been a way of life in Iraq at least since 401 BC when Cyrus, pretender to the Persian throne, hired Xenophon and the Ten Thousand (Greek hoplites, out of work at the end of the Peloponnesian War) to fight for his cause.
In the last 20 or so years private security has become lucrative, with Iraq the latest business opportunity. For example, many of the companies that work in Iraq also provide security for oil and mining corporations in Africa and South America - Executive Outcomes being one of the more notorious operators in Africa.
Machiavelli, who had direct experience of mercenary troops in 15th/16th century Italy, scorned their abilities: "If a prince bases the defence of his state on mercenaries he will never achieve stability or security." A lesson for the Americans and modern day Iraq perhaps?