President Bush's decision to commute Scooter Libby's may seem like some kind of compromise between a full pardon and sending Libby to jail.
It may be more sinister than that. Since Libby's conviction stands, Libby will almost certainly continue his appeal to have his conviction overturned. His many Republican supporters will probably defray the costs of the appeal so it will cost Libby nothing.
Now, with an ongoing criminal appeal, if Libby were called before a Congressional Committee and asked to testify about efforts by the Vice President's and President's offices--including Cheney, Bush and Rove personally--to discredit Joe Wilson and reveal that his wife Valerie Plame worked for the CIA--Libby can refuse to testify by taking the Fifth Amendment against self-incrimination. If Bush gave Libby a full criminal pardon, the Fifth Amendment would no longer be applicable and Libby could probably be forced to testify or face jail for contempt of Congress.
The same applies to the civil suit by Plame against Libby in which he could otherwise be asked in depositions or on the witness stand how the Vice President's and President's office participated in Plame's outing. Moreover, if Libby knew he was going to jail (and he probably received secret assurance from the administration all along that they would never let that happen), he might have gone to federal prosecutor Fitzgerald and provided information on Cheney, Bush and Rove in exchange for Fitzgerald recommending a reduced sentence to the Judge.
So by commuting the sentence, Libby avoids prison, and the Bush/Cheney administration keeps the details of its campaign against Wilson and its outing of Plame secret. Libby's supporters will almost surely raise money to pay off his $250,000 fine. And while Libby may be disbarred from practicing law, he still has a lucrative career ahead of him as a lobbyist or consultant for a right wing think tank.