This is only a brief introduction.. those interested please come
my forum and read up some of the threads. 
8 fold path is broken down into 3 parts: Morality, Mental
Development, Wisdom.
Without morality, one's mind is disturbed by evil thoughts and
guilt and etc, and will not be able to practise samadhi and wisdom.
Without morality (skillful action, skillful speech, skillful
livelihood), you will suffer bad karmic consequences and your life
will be in a mess. You will bring others and yourself lots of
unnecessary troubles and sufferings.
Next part is mental development, which consists of skillful energy,
skillful concentration, and skillful mindfulness. They are
necessary otherwise the mind is scattered and will not be able to
focus and develope insights. This part of development can lead to
all sorts of amazing meditative experiences like jhanic bliss (I
had some of these experiences before) which are more blissful than
anything (including sex). They may even lead to development of
psychic abilities. However, in Buddhism, concentration is not used
as a means to itself or to develope psychic powers, but used for
developing Insights and Wisdom. Non-Buddhist meditative practises
such as Qi Gong, Yoga, etc, belong to the Shamatha category, which
are concentrative practises but by itself does not necessarily lead
to insights.
The last part, Wisdom, is essential to develope insights into
Reality, so that one may awaken from the dream of samsara... into
to the dream of samsara. Because nirvana is not somewhere far away,
it is just samsara rightly seen. Only a quantum leap in perception
is required and this time you know it's dream-like and no longer
grasps on appearances. All appearances are self-luminous
(expressions of pure awareness) and empty (no locality, only
dependent co-arising out of conditions), self-arising and
self-liberating. You'll be able to see how the
nature/characteristics of phenomena as impermanence (arises and
passes instantaneously), dukkha (suffering) and not-self (no self
to be found anywhere).
The wisdom section has the two last parts of the path: skillful
thought or intention and skillful understanding or wisdom. They are
about understanding the truth of your experience and aspire to
kindness and wisdom in your thoughts and deeds.
Mental development and Wisdom part is where Shamatha-Insight
practise comes in. Whether it is Theravada (they call it
Samatha-Vipassana), Zen or Vajrayana (Shamatha-Vipashyana), they
all teach this part to develope wisdom that leads to
enlightenment.
Here, strong mindfulness and clarity is developed which is able to
penetrate through our illusions to realise the nature of our
reality/experience (self luminous emptiness, 3 dharma seals, etc).
For example we always assume and are comfortably identified with
our body-mind as our sense of self. In deep meditative clarity, the
arising of thoughts are clearly perceived... In such meditation,
one will discover that there is really NO observer of these
thoughts. The subsequent thoughts that arise after the previous
thought are the 'observation' of their predecessors. This is just
an example, paraphrasing one of my friend's own realisations and
experiences. There are many series of realisations along one's
path, what is mentioned is only one of them. In a way it works like
the 'regression' concept you mentioned earlier. Insights developed
through deep clarity shatters all our delusions and
attachment.
How will people know they are enlightened? When they no longer have
doubts about the nature of reality because what is more real than
real cannot be doubted. Will an outsider be able to verify? Other
enlightened ones have ways to verify, for example Zen Masters have
'checking questions'. Usually enlightened people will know another
person's enlightenment just by meeting each other and having a few
conversations. For people like me, I can usually make a good guess
base on his writings and my guesses are usually quite accurate,
though I cannot be sure because I am not enlightened yet.
