It's a bad scenario: surgically remove skin from the sheep's rear end, or face fly-strike. After mulesing the sheep is alive and lives a happy, sheepy life. After fly-strike a sheep can die, have gangrene, infections and live a poor life. The two options weighed, I'd say docking and mulesing, although painful at first, leads to a better quality of life for the sheep.

I lived on a farm as a child and have seen muelsing performed. It would be nice if farmers could provide some sort of painkiller for them but who the hell can afford to purchase thousands of dollars worth of painkillers? Nobody can, especially farmers because supermarket chains (who announce record profits each year) pay farmers an abysmal amount of money for all their efforts. And pharmaceutical companies are certainly not going to turn down making a huge profit either, so i doubt any farmer could get a pharmaceutical benefits scheme from them unless the government made them. As unpleasant as it is, it is done with a reason. The excess skin around the sheeps bottom (and thick wool if it isn't cut short around there) provide flies with an ideal breeding ground. They lay their eggs there and once the larva hatch, they can end up travelling inside of the sheep causing infection, internal complications and death. There are chemicals made to help prevent flyblown but after a while flies become immune to them, which is why these companies need to make so many different brands. These chemicals can also cost a lot of money, and if a farmer is going through a particularly bad year (drought, etc), then they may not be able to afford this chemical or enough of the chemical to cover all of their sheep. My mother dealt personally with a pregnant ewe who was unfortunately flyblown. The lamb had died inside of her and had been there for a while, the mother was extremely ill, there was flies and maggots all around her bottom and obviously inside of her because of the lamb. That lamb ended up coming out in bloody pieces, so if PETA supports this kind of horror then by all means go ahead, but many sheep die from flyblow each year and i think its crueler NOT to do anything to prevent it. If they want a more humane way of preventing flyblown sheep them maybe they can farm sheep themselves and come up with another method that works. I'm not trying to make that sound horrible either, if PETA really wants to make a difference then they can start to finding better ways to do things rather then ranting and raving to everyone else about how cruel we all are. Muelsing is, at current, the best method we have for preventing death by flowblow, but i'm not saying there couldn't be a better way. Having personally lived on a farm that has looked after sheep, i think i know a heck more about muelsing then most of PETA do.