This alert system is basically bunk just for the Administration to cover its not-so-pretty derriere when it is ineffective in the future to prevent another terrorist attack.
The alert level is based principally on measurements of communications in/to/from Arabs and muslims on the phone, email/internet, fax, and mail.
It is secondarily based on a measurement of the amount of tourist-like activities happening like taking pictures or standing around monuments, govt. installations of note, etc.
It is thirdly based on human intelligence, but this basis is very, very weakly applicable right now for a multitude of reasons, including our second-rate penetration of terrorist organizations and, to a lesser extent, our unwillingness to fully include American muslims and arabs in our intelligence and law enforcement efforts short of a 12 to 24 month background check... about double what it is for most others.