What is the background to the crisis?
Relations between the US and North Korea have been deteriorating since George Bush labelled North Korea part of an "axis of evil" in January 2002.
The following October, the US accused North Korea of developing a secret, uranium-based nuclear weapons programme.
Washington is not only concerned about the development of such weapons in North Korea, but also wants to curb Pyongyang's capacity to export missile and nuclear technology to other states or organisations.
Since the October 2002 confrontation, North Korea has restarted a mothballed nuclear power station, thrown out inspectors from the UN's International Atomic Energy Agency and pulled out of the Nuclear Non-proliferation Treaty.
It may be that North Korea has been trying to use the nuclear issue as a hard-line ploy to negotiate a non-aggression pact and improved economic aid from the US.
What is the immediate effect of North Korea's announcement?
If a nuclear test is confirmed, it will cement North Korea's place as a nuclear power, effectively ending hopes of resolving the stand-off through stalled six-nation talks.
It would also greatly increase the risk of an East Asian arms race, as countries like Japan and South Korea weighed up whether to go nuclear as well.
Why has North Korea decided to test now?
With such a secretive regime, it is difficult to tell. Kim Jong-il may have decided the US was never going to meet his conditions for giving up the North's nuclear programmes.
North Korea's official media has long warned that the US was preparing to attack, and developing a nuclear capability was the only way to prevent this.
Mr Kim may also still be smarting after China, the North's only real ally which backed UN sanctions against the country in July.
What do we know about North Korea's nuclear weapons programme?
North Korea claims to be working on building up its nuclear weapons arsenal but this is hard to verify.
Most arms control experts suspect North Korea did pursue an active weapons programme - certainly up to 1994, when it signed a landmark agreement to freeze all nuclear-related activities.
US officials have put the number at "one or two". About 8,000 spent fuel rods that were put into storage in 1994 could also be used to extract enough weapons-grade plutonium for a handful more weapons, the US believes.
North Korea has said it has already finished reprocessing these fuel rods, although South Korean and US intelligence are unsure whether to believe that claim. Other estimates say the North may now have eight or more bombs.
Could North Korea now drop a nuclear bomb?
Security analysts do not believe it has managed to make a device small enough to deliver on a missile, suggesting its only way of dropping a bomb would be via aircraft, which the US and its allies would be able to monitor.
However, the North is also working on long range missiles, one of which is believed to have a potential range of several thousand kilometres.
The test will add to pressure on Japan to speed up its missile defences, and also may add to calls for Japan to have a nuclear deterrent too, though the US would firmly oppose this.
What will be the effect on North Korea's relations with its neighbours?
Last week, China, normally on good terms with North Korea, told its neighbour to "keep calm and restrained on the nuclear test issue".
All the regional players are concerned that a nuclear-armed North Korea could change the balance of power in the region and trigger an arms race.
The North Korean threat has presented Japan's Prime Minister Shinzo Abe, only in office for a few days, with the first crisis of his administration.
Japan is already building up a missile defence system and will soon receive US Patriot missiles designed to intercept incoming ballistic warheads.
Meanwhile, South Korea may be well placed to push North Korea when Ban Ki-Moon, the South Korean Foreign Minister and a veteran of North Korean talks, is expected to be confirmed as the next United Nations Secretary General.
Yu Myung-Hwan, the South Korean deputy foreign minister, even raised concerns that a North Korean nuclear test could prompt Japan to build a nuclear weapon of its own.
What is the next likely/possible course of action?
If the North Korea nuclear test is confirmed, the consequences could be very serious for the region.
It may accelerate a defence build up in Japan and South Korea and possibly force China to take a more proactive role in regional security.
Has the international community tried to prevent a nuclear crisis with North Korea?
North Korea walked out of six-party talks aimed at resolving the nuclear issue nearly a year ago and refused to return to the negotiating table until the US lifted its financial sanctions.
In July the North Koreans test fired their new Taepodong-2 surface to surface missile and fired other ballistic missiles. It was widely assumed that the six-party talks was the only forum which can resolve this stand-off.
(Picture credit: hungry-i)