Newdow

Michael Newdow is an atheist with a daughter in the Elk Grove school district. The state has a law, and the school district a rule, that require teachers to lead students each morning in reciting the Pledge of Allegiance. The pledge was first codified in law in 1942. It read "I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one Nation indivisible, with liberty and justice for all." In 1954, the words "under God" were added after "Nation." The codified pledge is at 4 U.S.C. sec.4.
Newdow claims he's injured when his daughter is compelled to either say the pledge as it is, or watch and listen as her teacher leads her classmates in the pledge--proclaiming that there is a God residing over our nation. His action is a First Amendment claim--namely resting on the Establishment Clause.
Over time, the court has developed three different tests to analyze whether a government act violates the Establishment Clause, interpreting the Constitutional words that "Congress shall make no law respecting an establishment of religion." While some Justices have argued "establishment" means nothing more than Congress actually creating a state church (eg, the Church of England), others (myself included) regard the term more broadly. It is noted that proposed drafts of the clause prohibited, specifically, a National church. In the end, the broader term, 'religion,' found its place in the Constitution. And religion is, see the post below, a bit vague of a term.
The three models of analyzing are 1) the Lemon test; 2) the endorsement test and 3) the coercion test. I won't explain Lemon because it's basically out.
Endorsement
O'Connor gave us the endorsement test--which focuses on whether the government action endorses religion. The pledge's statement that we are a nation under God is a profession of religious belief. It is not, as some argue, merely an acknowledgment that many Americans believe in God, or of the historical significance of religion in the country. Rather, as the Court of Appeals wrote, the statement "is normative. To recite the Pledge is not to describe the United States; instead, it is to swear allegiance to the values for which the flag stands: unity, indivisibility, liberty, justice, and - since 1954- monotheism." In making this text official, the government takes a stand on the question of the existence of God. It is, thus, an endorsement; and it sends a message to non-believers that they are outsiders.

Coercion
Justice Kennedy gave us the coercion test in Lee v. Weisman. In that analysis, the Court asks whether the government action places the person in the position of choosing between participating in an exercise with religious content or protesting. As in Lee, the coercive effect is pronounced because of the setting: the impressionability of schoolkids, the pressure to adhere to norms. Also, under Lee, not being required to participate does not make the action un-coercive.
Also, the court said in Lee: "What to most believers may seem nothing more than a reasonable request that the nonbeliever respect their religious practices, in a school context may appear to the nonbeliever or dissenter to be an attempt to employ the machinery of the State to enforce a religious orthodoxy."
The pledge, then, is plainly coercive, as was in fact its attempt to be. Upon the passing of the 1954 amendment, Eisenhower proclaimed: "From this day forward, the millions of our school children will daily proclaim in every city and town, every village and rural schoolhouse, the dedication of our Nation and our people to the Almighty."

The Lemon test, quickly, is the oldest and most disregarded. It asks three questions: 1) does the law have a secular purpose (no); 2) is it reasonably likely to appear as an endorsement?; and 3) will the law cause excessive government entanglement with religion?

For a discussion on the case, I commend you to Professor Hamilton. A couple segments:

If anyone thinks that this case is not about the power of the entrenched religious versus the powerlessness of nonbelievers in this society, today's oral argument proves them wrong. Chief Justice Rehnquist floated several proposals to defend "under God." First, he stated that the two words were not really a "prayer," a distinction without a difference.

But his second point led to the most enlightening moment of the day. The Chief noted that Congress unanimously added the two words "under God" in 1954, implying that no one found it offensive then so how could it be offensive now, or perhaps worrying that the Court was in no position to quibble with Congress when it acted with such unity.

But Newdow responded with the undoubtedly true statement, "That's only because no atheists can be elected to office." And when he did, individuals in the audience began to clap.

They immediately proved his point. As an atheist, he is disenfranchised precisely because of his beliefs. He cannot be secure in knowing the school district will not try to inculcate his daughter in the majority religion, he cannot be elected to office, but more importantly, he cannot even argue a case at the Supreme Court--that most hallowed of courtrooms--without being heckled. The preference for "under God" cannot be separated from the desire to suppress conflicting beliefs.

On matters of conscience, it is the Supreme Court's most solemn duty to protect vilified minorities from the majority's demands. From the perspective of the freedom conscience, it is obvious that Newdow should win.