Al-Arabiyya is also reporting, according to CNN, that Mubarak will announce that he will not run for a new six-year term in the presidential election scheduled to take place this September.
There are a couple of quick things that should be said here:
First, while Al-Arabiyya has historically been one of the more reliable Arab satellite channels I would not take this as a given. There are a lot of rumors flying about, and even the best vetting system can let something through. I have no access to Al-Arabiyya and, so, no way to judge the report on my own, so I can't offer any opinion on the solidity or lack thereof of Al-Arabiyya's sourcing. (LATE UPDATE: Al-Jazeera English is also carrying the story - though without sourcing at all... which makes me think they are just picking it up from Al-Arabiyya via Reuters... i.e. a self-reinforcing loop, not independent confirmation).
Assuming, however, for the sake of argument, that this report is accurate I would not count on it changing the attitudes of many of the people out in Tahrir Square tonight. Mubarak is 82. Until last week the only political question of consequence in Egypt was whether he was going to run in September or pass the presidency on to his son Gamal. I think we can all agree that Gamal's chances of inheriting the presidency are now close to nil, but if Mubarak thinks these ever-larger crowds will be mollified by a promise to step aside in eight months I suspect he is sorely mistaken. Two weeks ago that might have looked like an act of dictatorial statesmanship. Five days ago it might have taken the steam out of the demonstrations. But based on what we are seeing now, I simply can't see how that is going to work.
It bears repeating: the generals around Mubarak are loyal to him. But they have a deeper loyalty to the institution of the military. They will keep Mubarak - one of their own - in power for as long as they can, but they will not risk the military's position as the final arbiter of Egyptian politics and power to protect Mubarak.
By publicly refusing to honor any order to fire on the demonstrators the Army has preemptively closed off many of Mubarak's options even as it has strengthened its own hand.
If Mubarak does offer to step aside this fall and that does not quiet the protests it will become much easier for the military to ease him from the public stage.