As a location for trade negotiation, the WTO is dead.
The factors identified by Anu and Daniel-- raw economic diffusion and divergence of interests-- are important. Of the two, divergence of interests among powerful states (or bocs of states) is more important. Perhaps surprisingly, US and EU GDP (respectively) as a proportion of WTO GDP have not changed substantially in the last two decades; each has accounted for roughly 30-34% of WTO GDP, even with the "rise" of the BRICs. China has emerged, but it accounts for only about 6-8% of WTO GDP as of 2006,depending upon how you measure, and it has not been a demandeur at the WTO. Using the Goldman-Sachs data, projecting forward (and making some assumptions about Chinese and Indian growth that are more conservative than G-S), Chinese and Indian shares of WTO GDP will rise substantially so that by 2025 China may have 12-15% of WTO GDP and India, Brazil, and Russia may each have 5-8%. At that point, we can begin to talk about multipolarity. Until then, something else is going on.
The key developments in the last 14 years (since the EU and US engineered the conclusion of the Uruguay Round) have been (1) successful coalition beahvior by developing countries and (2) the explosion of EU- and US-centered preferential trade agreements. Developing country coalitions have adhered better than ever before, partly in reaction to the end of non-reciprocity (Hudec's term for the preferences given to the developing world) that is the hallmark of the WTO (from a developing country perspective), and partly due to developing countries bundling together positions across a set of issues (a technique that has solved the "divide the dollar" problem they faced and that for decades allowed the US&EU to pry them apart). Participation by these coalitions has been institutionalized into the WTO negotiating process. Hence, we have moved from a hegemonic duopoly of the US&EU to a tripolarity in which developing countries have veto-power. As many developing country interests run orthogonal to those of the US&EU (as Daniel suggests), we have deadlock. New decision-making rules (such as those suggested by Greg) are hopeless in this context: neither the US nor the EU nor developing countries would agree to a rules that eliminate their veto-power.
The explosion of preferential trade agreements (PTAs) is important not just because PTAs offer another opportunity for negotiation, one in which the EU or US may be more dominant than in the WTO and so more successful on their own terms. It is important because the MFN guarantees in the EU- and US-centered bilaterals make it impossible to replay the 1994 "power play" that concluded the Uruguay Round: the EU and US can no longer credibly threaten to deny MFN to GATT/WTO members that do not go along with their wishes (as they did in 1994) by merely exiting the WTO and reconstituting a legally distinct "new" WTO; unlike 1994, the US and EU each owe MFN to many countries independent of the GATT Art I obligation by virtue of their MFN obligations in their free trade agreements. They would have to exit all trade agreements to replay the 1994 power play.
Note this does not make the WTO irrelevant. Negotiations may be dead but dispute settlement is very much alive and empowered. The same law and politics that are deadlocking the WTO negotiating process are deadlocking the WTO Members' ability to check behavior by the Appellate Body. Indeed, the WTO dispute settlement system may be crucial to fighting protectionism during the current downturn.