In the latest bloodshed, an Israeli missile killed a senior Islamic Jihad militant in a strike on a Gaza City tower housing Palestinian and international media, the Israeli army and militants said.
It was the second time in as many days Israeli warplanes have targeted the building, with Israel accusing the militants of "cynically (using) those inside civilian-populated institutions as human shields".
As the violence raged for a sixth day, ceasefire efforts gathered steam, with Hamas officials in Cairo saying Egyptian-led talks with Israel were "positive" but now focused on the need to guarantee any truce.
Desperate for a safe haven, many Gaza families have fled their homes in search of a safe place, with some seeking haven in the south, which has seen fewer strikes.
But they know nowhere is safe.
"My son Mohammed refuses to eat. He follows me everywhere because he's so scared and asks me every 10 minutes when we're going to die," said Umm Jihad, 37.
"He says he won't go back to school because he's scared he'll be martyred or that he'll come back from school and find that I or his brothers have been killed," she told AFP.
Mourners flocked to the funeral of nine members of one family killed in a weekend strike on a Gaza City home, the tiny bodies of the five children carried through the streets wrapped in Palestinian flags.
"Do children fire rockets?" shouted a man through a loudspeaker, as the crowd roared back: "No!"
The violence, which comes as Israel gears up for a general election on January 22, raised the spectre of a broader Israeli military campaign like its 22-day Operation Cast Lead, launched at the end of December 2008.
Analysts say Israel's leadership appears satisfied with the success of Operation Pillar of Defence and that could it be ready for a ceasefire.
But the Jewish state has signalled it is ready to expand the operation.
And Gaza's Hamas rulers have been emboldened after securing the support of the recently installed Islamist governments of Egypt and Tunisia.
Death toll mounts
The overall death toll from the Israeli raids on the Palestinian territory hit 98, with another 21 people killed on Monday.
The Israeli army said that 42 rockets had been fired so far on Monday and another 19 intercepted by the Iron Dome anti-missile system.
To date, the Israeli military has struck more than 1,350 targets in Gaza, and 640 rockets have crashed into southern Israel while another 324 were intercepted.
The latest negotiations aimed at ending the conflict, conducted behind closed doors in Cairo, ended without agreement. But all sides have expressed a willingness to engage in more talks.
Hamas has demanded Israel lift its six-year siege of Gaza as a basic condition for a truce and is also understood to be seeking guarantees Israel will stop its targeted killings, like the one which killed a top military commander on Wednesday, sparking the current round of hostilities.
The Jewish state has showed little sign of being ready to call off or even briefly halt its campaign, with Foreign Minister Avigdor Lieberman insisting "the first and absolute condition for a truce is stopping all fire from Gaza".
A string of international leaders have visited the region in recent days in a bid to end the bloodshed, with UN Secretary General Ban Ki-moon expected to arrive on Tuesday for two-days of talks with Israel and Palestinian leaders.
Speaking in Jerusalem after meeting Israeli President Shimon Peres, Mideast Quartet envoy Tony Blair expressed hope a truce would firm up in the coming days.
"I very much hope that during the coming days we can achieve cessation on a basis that stops the threat of missiles coming from Gaza, targeted at Israeli civilians and also then relieves the people of Gaza," he said in remarks broadcast on public radio.
German Foreign Minister Guido Westerwelle was also due to arrive in Jerusalem on Monday just days after Prime Minister Benjamin Netanyahu warned Israel was ready to "significantly expand" its operation.
On Monday morning, public radio reported that some 40,000 reservists were already massed near the Gaza border.