From the Detroit News:

The State Department didn't revoke the visa of foiled terrorism suspect Umar Farouk Abdulmutallab because federal counterterrorism officials had begged off revocation, a top State Department official revealed Wednesday.

Patrick F. Kennedy, an undersecretary for management at the State Department, said Abdulmutallab's visa wasn't taken away because intelligence officials asked his agency not to deny a visa to the suspected terrorist over concerns that a denial would've foiled a larger investigation into al-Qaida threats against the United States.

"Revocation action would've disclosed what they were doing," Kennedy said in testimony before the House Committee on Homeland Security. Allowing Adbulmutallab to keep the visa increased chances federal investigators would be able to get closer to apprehending the terror network he is accused of working with, "rather than simply knocking out one soldier in that effort."

This is really all that we need to know. But the evidence of the Haskells about how he was helped to get onto the flight by a smartly dressed man (which has not been widely reported) is also of interest:
http://www.mlive.com/news/detroit/index.ssf/2009/12/flight_253_passenger_says_at_l.html.