Why were Americans outraged when a German submarine torpedoed the British ship Lusitania?

In May 1915, the Lusitania was sank by a German U-Boat (submarine) off the coast of Ireland. About 1200 lives were lost, many hundreds of whom were American. Naturally, the Americans became angry that the Germans sank a ship full of passengers without provocation. War seemed imminent, but for the time being, President Woodrow Wilson kept his campaign promise and did not ask Congress for a declaration of war.

Germany's naval strategy at this time was to sink any ship the U-Boats saw. The international rules of engagement prohibited this behavior, but who cares, said the Germans, this is war! Unfortunately, their indiscriminate destruction of virtually every enemy ship led to their sinking of the Lusitania. The Germans thought it was best to let up on this policy, lest they make America even more furious, so they ceased the sink-on-sight policy.

However, by 1917, Germany was getting desperate. They were forced to resume the policy, making America very angry once more. On top of that, they attempted to enlist the help of Mexico - in exchange for fighting the U.S., the Mexicans would be rewarded with the territory they had lost 70 years earlier. Of course, Mexico gave not a thought to this proposal; fighting a powerful country like America would be suicide. What the Germans did succeed in doing was provoking the beast, and America soon declared war.

The lives on the Lusitania were not lost in vain, though. Germany's brief abolition of sink-on-sight allowed Britain to breathe a sigh of relief, as much needed materials could now cross the Atlantic in relative safety.