What is the Iron Dome
http://en.wikipedia.org/wiki/Iron_Dome
Iron Dome is a mobile all-weather air defense system developed. It is a missile system designed to intercept and destroy short-range rockets and artillery shells fired from distances of 4 to 70 kilometers away and whose trajectory would take them to a populated area. The system, created as a defensive countermeasure to the rocket threat against Israel's civilian population on its northern and southern borders, uses technology first employed in Rafael's SPYDER system. Iron Dome was declared operational and initially deployed on 27 March 2011 near Beersheba. On 7 April 2011, the system successfully intercepted a Grad rocket launched from Gaza for the first time. On 10 March 2012, The Jerusalem Post reported that the system shot down 90% of rockets launched from Gaza that would have landed in populated areas.
By November 2012, it had intercepted 400+ rockets.
The Iron Dome system is also effective against aircraft up to an altitude of 32,800 ft (10,000 m).
Israel's Iron Dome missile shield

1. Enemy fires missile or artillery shell
2. Projectile tracked by radar. Data relayed to battle management and control unit
3. Data analysed and target co-ordinates sent to the missile firing unit
4. Missile is fired at enemy projectile
Cost
In 2010, Iron Dome was criticized by Reuven Pedatzur, a military analyst, former fighter pilot and professor of political science at Tel Aviv University for costing too much compared to the cost of a Qassam rocket (fired by Palestinian forces), so that launching very large numbers of Qassams could essentially attack Israel's financial means. The estimated cost of each Tamir interceptor missile is US$35,000–50,000 whereas a crudely manufactured Qassam rocket costs around $800. Rafael responded that the cost issue was exaggerated since Iron Dome intercepts only rockets determined to constitute a threat, and that the lives saved and the strategic impact are worth the cost.
In an op-ed in Haaretz, Jamie Levin suggests that the success of the Iron Dome system will likely increase demands to field additional systems across Israel. Budget shortfalls mean that Israel will be forced to weigh spending on missile defenses against other expenditures. Such funds, he argues, will likely come from programs intended to help the most vulnerable sectors of society, such as social welfare.
From 1995 to 2005, the United States and Israel jointly developed Nautilus but scrapped the system after concluding it was not feasible, having spent $600 million.