In Hamlet, what is the function and significance of Hamlet's soliloquy "To be or not to be"?

This soliloquy placed just after Hamlet's soliloquy in Act
2 when he devises a plan to "catch the conscience of a king."  It is interesting that it
is placed at the beginning of Act 3 just before we see Hamlet and Ophelia on stage
together for the first time, a scene in which Ophelia is acting as bait while her father
and Claudius spy on Hamlet.  It is a beautifully meditative speech debating the pros and
cons of living in this world when suicide would take one out of this "sea of troubles"
into a world of sleep.

It is clear from this soliloquy that
Hamlet is not mad.  He is melancholy about life, but not necessarily suicidal.  The
soliloquy is not in first person.  At the end of the soliloquy, Hamlet reasons that
because we fear the unknown in the afterlife, we will continue to live in a world that
causes pain and suffering.

It is important that we see
Hamlet here as thoughtful, logical, and perceptive.  In contrast, we can see his actions
toward Ophelia as more of an act put on for the benefit of the two spies Claudius and
Polonius, whose presence Hamlet most surely has
detected.

But the "To be or not to be" soliloquy also shows
Hamlet's dread of killing.  He is most reluctant to take revenge and he most likely
fears the confirmation of the ghost's words that is sure to occur when the play that
Hamlet has requested is performed.  Life to Hamlet seems overwhelming just now, and
suicide is an appealing idea.  Death seems more appealing than seeking
revenge.

But Hamlet is not suicidal.  He sees the path
ahead that he must go down, however reluctantly, and after the play-within-a-play, he
seeks the revenge his father's spirit requested.  Of course, his attempt at revenge
fails when he kills Polonius instead of Claudius, and the play takes another
turn.