Liberal leader Michael Ignatieff and the Prime Minister have worked out an agreement that will avoid an election this summer. I'd have to say this was a smart move for everyone. A summer election would further push Canada into a state of democratic apathy.
The Conservatives aren't doing so badly in the polls that Ignatieff has made a mistake in not seeking an election, and they aren't doing so badly that he could legitimately call it an unpopular government that needs to be removed. The Liberals aren't so far ahead that a victory is assured, and they would have risked forming a very shaky minority themselves or giving the Tories another minority, but much reduced in both size and stability. The NDP would have lost half of their MPs, and the Bloc would have spent a lot of money for no real gains or losses.
I imagine we'll be talking about an election again in the fall or winter. It will be interesting to see how things progress in the polls over the summer.
UPDATE: From reports that are coming out, it seems part of the agreement includes an opposition day at the end of September, giving the Liberals a chance to put forward a non-confidence motion at that time if they don't like what transpired over the summer or what the Tories have to say in their economic update. That would put election day somewhere around the end of October or beginning of November - perfect campaigning weather.