Russia advances from South Ossetia and Abkhazia to bombing targets in core, undisputed Georgia. Putin has been widely quoted as saying the conflict will be taken to its "logical conclusion."
That leaves us to speculate about what that means. Let me offer one guess, something I have thought about in the context of a US attack of Iran: a military assault by one country upon another, with the main goal of eliminating the entire military capability of another country. Although some key civilian infrastructure may be destroyed — particularly items such as bridges with dual civilian and military roles — the civilian apparatus in general is largely left untouched. (something smarter bombs enable, in modern warfare) Occupation of the country is never considered even as a possibility.
Given the relative military strengths, Russia is clearly pursuing a war of punishment at this point. The biggest open question, I think, is not occupation but whether Russia will actively seek to depose Saakashvili and other Georgian politicians.