The Wikipedia entry on middle knowledge (you get redirected to the entry on Molinism) has this to say:
This account allows God to arrange for a person to carry out a specific act, without overriding [human] free will; instead, God can arrange the circumstances surrounding the choice so that the act is both freely chosen and providential.
An important feature in this account is that, although God knows how free agents will act in any situation, God does not determine or cause (at least exclusively) the actions and choices of the free agent; if he did, there would be no freedom.
It sounds as if, from God's point of view, people are rats in a maze whose walls God can shift, leaving the rats free to navigate the maze.
Part of the problem, though, is the phrase "circumstances surrounding the choice." Does this imply that God arranges only external circumstances (by which I mean, circumstances physically outside the bounds of my body), or does God tinker with internal circumstances as well? This is the difference between (1) rearranging the maze's walls and (2) rearranging both the maze's walls and elements inside the mouse's body.
A strange set of dark splotches is visible on my chest X-ray. The doctor tells me we might need more tests. These splotches don't seem to have affected me up to now, perhaps because I haven't been aware of them. Now, however, I ponder whether I'm staring at evidence of lung cancer. Perhaps the time has come to quit smoking*. A behavioral change: internal circumstances will have affected my choices.
Just how invasive is God's "arranging" of things?
By the same token, how expansive is human freedom? This has always been a problem with arguments about free will: they rarely seem to consider the nature of the interaction between the purportedly free agent and the agent's surroundings. Do I reside inside some invisible "sphere" of freedom? Does my skin define the boundary of my freedom?
Obviously, the above is ridiculous: first, my skin is porous and is constantly replacing itself; it's not a definite boundary. At the microscopic level, it becomes very difficult to see where "I" end and "my external circumstances" begin. Second, my surroundings are often no less an extension of will than my material body. I get into a car; the car itself articulates my will as I move toward my destination or follow my whim. My tea mug comes to contain tea because I set in motion a series of "circumstances" that culminate in the tea-poured-into-mug event. I throw a rock. Fire a gun. Launch a nuke. Shout an obscenity. Type a blog post.
What, then, are the boundaries of human freedom? A single person can profoundly alter the course of history: Jesus, Hitler, Rosa Parks. A mass of people can get together and make almost no ripple in history. The boundaries of human freedom seem impossible to define; the effects of human action seem impossible to calculate.
And of course we always come back to the problem of God's foreknowledge. If God's knowledge consisted only of middle knowledge, perhaps there'd be no problem. After all, chess-playing computers are able to calculate possibilities, and they track different "possibility-trees" as the game plays itself out. This is a kind of middle knowledge**, too, but it's not omniscience in the classical theistic sense.
And that's the rub. Divine omniscience, classically formulated, means that God knows where every single speck of matter is going to be at time t long before it ever reaches that location in spacetime. That includes the molecules that make up your body.
Dr. Hodges wrote me an excellent explanation of middle knowledge once. In part, his explanation says:
Note three logical "moments" in God's knowledge: natural, middle, and free.
In God's natural knowledge, he knows all necessary truths, and all possibilities -- what could be true if God were to create worlds, including what free creatures could do. This knowledge is essential, or "natural" to God as God.
In God's free knowledge, he knows the true propositions about an actual world, including his omniscience of what will happen, e.g., what free creatures will do. It is "free" knowledge because it depends upon God's free act of creation. This knowledge is not essential to God's nature.
Between these two logical moments of God's knowing lies his middle knowledge, the knowledge that God has about particular worlds that he has not yet created but may freely create. This knowledge includes knowledge of what every free creature would do (not just could do). Like God's natural knowledge, this knowledge is logically prior to his free act to create, but like God's free knowledge, the content of this knowledge is dependent upon the actions of free creatures. Thus, "middle" -- between the other two types -- of knowledge.
There's a real question, though, whether divine omniscience, classically conceived, allows room for possibilities. Not being a compatibilist, I believe the answer is no: if God knows what's going to happen down to the minutest detail, there are no possibilities from God's point of view. Unconstrained by time, God perceives the universe from the aerie of his eternal Now, like a person who takes a roll of film off the movie projector, unrolls the entire thing, and can see at a glance how all the moments of the movie play out. What seems possible to us is actual to God. There are no other possible universes: if God knows you're going to sneeze in five minutes, you're going to sneeze in five minutes. God can't know what's not there to be known. Your sneeze is known to God because it's going to happen. The story of your sneeze was written before the world was born.
We could try to circumvent the problem by delving into the nature of God's independence from spatiotemporality, but such a discussion is meaningless for people who don't grant that God exists.
In my opinion, middle knowledge, knowledge formulated as conditionals ("I know that if he does X, then Y will happen"), is in no way compatible with classical divine foreknowledge. Unlike the chess-playing computer, which in truth can't predict what moves its opponent will make, God's omniscience rules out the murkiness and spatiotemporal plasticity of human freedom.
Yoda famously said, "Always in motion is the future," which shows his own middle knowledge percipience. But for the God of classical theism, the future is already set in stone. There is no motion; there is only the film, running its unalterable course frame by frame through the projector of God's mind.
*Ladies, rest assured. I don't smoke. I eat. And eat. And eat.
**I use the word "knowledge" loosely here. We haven't established whether a computer has a mind, or even whether the definition of "knowledge" necessarily implies a conscious knower.