According to Newsday, using technology that might have come from Iran, special Hezbollah hacker teams monitored the constantly changing radio frequencies of Israeli troops. They were able to get a clear picture of Israeli movements, casualty reports, supply routes and mobilise tank hunting units.
A Hezbollah commander told Newsday that it was not able to listen in to all the Israeli communications all the time, but managed to get into the system enough times to do some serious damage.
Like most of the world's armies, the Israeli's use a practice known as "frequency-hopping" to prevent radio messages from being jammed or intercepted. Messages are also encrypted. The technology used is a US designed communication system called the Single Channel Ground and Airborne Radio System.
The fact that Hezbollah could listen into and decrypt any of these messages seems to have put the wind up Israeli and the US military.
Some observers believe that Hezbollah might have taken advantage of 'user error' to crack the system. Soldiers under stress sometimes forget to follow secure radio procedures. But it is also likely that Hezbollah had some pretty natty jamming and eavesdropping devices. The also had managed to get the mobile phone numbers for Israeli commanders so they could listen in.
More here. µ