Actually I've wondered about this issue for a while too, but I haven't been able to find any complete answer on it.
The people who do it say that it is the only effective form of jihad left, that it is not suicide, but martyrdom.
The ulama I have talked to on the matter, say that suicide bombing is not allowed in Pakistan, and if you are somewhere else, ask the ulema of that region who know the situation better.
They also say that while it is wrong for us, it may not be wrong for them in their situation, and Allah knows best.
I find this last statement curiously close to the statement made about suicides, that we are not in their situation and cannot know its details, and only Allah knows whether they are jannati or jahannami.
And, I can't make myself trust the ulema of the people who say it is right, as they also justify setting up bombs in supermarkets and schools, definitely not military targets by anybody's definition.
So basically, I don't know, and don't know who to ask.