Israel and the Palestinians are set to resume peace talks in Jerusalem on Wednesday, and have set themselves a nine-month goal of trying to reach a long elusive peace deal.

Here's what we know -- and what we don't -- about the latest US-led effort to bring peace to the Middle East, with the aim of creating a two-state solution with Israelis and Palestinians living peacefully side-by-side.

NEGOTIATORS

Israelis: Justice Minister Tzipi Livni, legal adviser Yitzhak Molcho

Palestinians: Chief negotiator Saeb Erakat, Fatah central committee member Mohammad Shtayyeh

United States: Former US ambassador to Israel Martin Indyk, dubbed "the facilitator", who could be backed at key moments by either US Secretary of State John Kerry or even President Barack Obama

TIMETABLE

After initial discussions about the talks themselves in Washington at the end of July, negotiations begin on Wednesday, following a release of Palestinian prisoners by Israel earlier in the day.

After that the tempo is expected to pick up.

Both sides have agreed to try to reach an agreement within nine months, no matter what "provocations" there are.

Further talks could be held either in the region or in Washington.

ISSUES

All the so-called "final status" issues -- the right of return for some five million Palestinian refugees and their descendants, the borders of a future Palestinian state, the fate of Jerusalem, the existence of Jewish settlements -- are on the table.

Israel has dashed any hopes for a halt to settlement building during the talks, which was a key Palestinian demand. Indeed, the government approved construction of more than 1,000 new settlement units three days before the upcoming round of talks.

The US position that a future Palestinian state should be based on the 1967 borders with mutual land swaps has not changed. But it is uncertain that this is the basis for the new negotiations.

Israel has agreed to a key Palestinian demand to release some 104 Palestinian prisoners -- many held in Israeli jails for decades, and approved the release of the first 26 before the Jerusalem meeting. The date for the release of the remaining prisoners will be decided by the government of Israeli Prime Minister Benjamin Netanyahu.

All sides have agreed to keep the details of the discussions top secret to give the negotiations the best chance to work.

NEXT MOVES

The US has been working with the Middle East Quartet on a plan to attract some $4 billion (three billion euros) in private investment to boost the Palestinian economy, which the State Department says it will roll out in the coming weeks.

Kerry said in July that Israel would be "taking... a number of steps in order to improve conditions in the West Bank and in Gaza". That could mean lifting some road blocks and bureaucratic hurdles to help the economy begin to flow, but as yet there have been no notable moves towards this.

Both Israel and the Palestinians have said any deal would be put to a referendum of their people.

WHAT WE DON'T KNOW

Everything else, including the big question of what a future deal will look like. There is no indication of how the talks will roll out, only an awareness that the "clock is ticking".

The parties have not decided yet how the core issues will be tackled and negotiated and no one is revealing whether there have been any mutual understanding, agreements or commitments as the basis for the talks.

How they intend to resolve such heart-and-soul issues as the holy city of Jerusalem, claimed by both sides as their capital, and the hopes of millions of Palestinians, who dream of returning to their homeland, remains as yet a mystery.

Israel frees Palestinian prisoners ahead of talks
Ramallah, Palestinian Territories (AFP) Aug 13, 2013 - Israel freed 26 Palestinian prisoners on Wednesday, hours before the two sides were to hold new direct peace talks amid a growing row over settlements.

A group of 15 crossed into the Gaza Strip at about 1:40 am (2240 GMT) and were mobbed by relatives as they got out of a bus next to the border.

At about the same time another 11 prisoners arrived in the West Bank city of Ramallah to a welcome from Palestinian president Mahmud Abbas and thousands of cheering, dancing supporters.

"This is the first group," Abbas told the crowd at an official welcoming ceremony at his Muqataa headquarters compound.

"We shall continue until we free all the prisoners from Israeli jails," he said.

The 26 were the first batch of some 104 long-term detainees who are to be freed in stages as part of a US-brokered deal which brought Israel and the Palestinians back to the negotiating table on July 30 for the first time in nearly three years.

But Wednesday's talks are likely to be overshadowed by Israel's advancement of plans to build thousands of new homes for Jewish settlers on lands the Palestinians want for a future state.

The prisoner release has been billed as a confidence-building gesture ahead of the meeting of negotiators in Jerusalem which was expected to take place at the King David Hotel in the presence of US mediator Martin Indyk.

But tempers were fraying on Tuesday after Israel approved construction of nearly 1,000 new settler homes in annexed east Jerusalem, sparking Palestinian allegations that they were aimed at torpedoing the fledgling talks.

Yasser Abed Rabbo, a senior official in the Palestine Liberation Organisation, said that the announcement, coupled with the weekend approval of nearly 1,200 homes in east Jerusalem and elsewhere in the West Bank, threatened to bring about the "collapse" of the talks.

"This settlement expansion is unprecedented," he said. "It threatens to make talks fail even before they've started."

Jerusalem city council said the approval for the construction of 942 new homes in the city's eastern Arab sector had been granted on Monday but had been in the works for years.

Two days earlier, Israel's housing ministry announced tenders for the construction of 793 settlement housing units in annexed east Jerusalem and 394 elsewhere in the West Bank.

In a bid to defuse the crisis, US Secretary of State John Kerry, whose dogged shuttle diplomacy brought about a first round of talks in Washington two weeks ago, phoned Abbas late on Tuesday, a senior source told AFP.

"The call Abbas received tonight from Kerry is part of ongoing US efforts to defuse a crisis before the talks (begin), as a result of the new settlement tenders today and in the last few days," he said, speaking on condition of anonymity.

"We are waiting for the United States to take a clear stance on the escalating settlement building, which we consider the biggest obstacle that Israel is creating to stop serious talks from happening."

Abbas's office also confirmed he had received a phone call from Kerry "to discuss developments in the peace process, on the eve of the resumption of negotiations".

Israel and the Palestinians last held direct negotiations in September 2010 but the talks collapsed several weeks later following a row over Israel's settlement building.

Last week, Washington announced the two sides would hold their next meeting on August 14 in Jerusalem, but so far, Israeli and Palestinian officials have remained tight-lipped over the time of the meeting.