With Beijing 2008 a few months away, I thought it was time to break down the MMA competition.
(In case it's not painfully obvious, this is purely speculative. To my knowledge, MMA isn't even being considered as an Olympic event. Everything written below comes out of some mirror universe, that almost perfectly resembles our own, except that MMA is an Olympic event and I'm married to Tricia Helfer.

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The Venue: Olympic MMA competition is going to be in a ring. The Octagon is a UFC trademark, so that was off the table. I think the reasoning here was that most fighters who have fought in the cage have also fought in a ring, while many fighters have only fought in a ring. Therefore, a ring should theoretically minimize the "home field advantage" of guys from the UFC, WEC, and Cage Rage. Also, the more conservative decision-makers in the IOC felt more comfortable with it being in a boxing ring or on a mat (like wrestling, judo, and tae kwon do). Since MMA is never on a mat, a boxing ring it was.
The Rules: A version of the Unified Rules of Mixed Martial Arts, as ratified by the New Jersey and Nevada State Athletic Commissions, are in effect. Simply put, UFC rules; no kicks to the head on the ground; 3 5-minute rounds with 1-minute rest periods; 4-to-6 ounce gloves; no gis, no long pants or shirts. The only difference is that elbows aren't allowed. This was another concession to the people still trying to swallow MMA as a sport, and it remains a point of contention. The USOC is negotiating for elbows to be introduced into Olympic competition in 2012, but for 2008, they're out.
The Judging, Scoring, and Refereeing: As with other international competitions, referees and judges must represent 3rd-party countries (so when an American is fighting a Brazilian, for example, the referee and judges cannot be American or Brazilian). Judging rules was another point of contention, and it was eventually decided to use the UFC-style "10-Point Must" scoring system.
The Competition: Olympic MMA features 6 weight classes, Heavyweight (265 lbs / 120 kg), Light-Heavyweight (205 lbs / 93 kg), Middleweight (185 lbs / 84 kg), Welterweight (170 lbs / 77 kg), Lightweight (155 lbs / 70 kg), and Featherweight (145 lbs / 66 kg). 8 countries reach the Olympic finals. Each country represented can nominate a single fighter in each weight class, with a backup who will compete only in the event of serious injury (neutral, Olympic medical officials will be evaluating each fighter after every fight). Fighters with parents or grandparents from another country may be eligible to fight for that country, at that country's discretion. Fighters will compete in a randomly-seeded, single elimination tournament consisting of 3 rounds.
The Countries in the Finals: Brazil, Canada, England, France, Japan, Mexico, Russia, and the United States have qualified for the final competition in Beijing.