why exactly is this going on, and considering the size of their country do they stand a chance?
The United States has a more powerful military than the next 5-10 countries combined - and that's including China. North Korea can't even feed its soldiers.
If it came to war, North Korea would be done. Gone. Kaput. Simple as that.
So why don't we just take them out now? Two reasons - Basically, China wants North Korea as a buffer zone between them and US influence (ie South Korea). China's getting real tired of their shit, though; they've basically told NK that if war breaks out, they're on their own.
Secondly, North Korea is holding South Korea hostage. North Korea has tons of missiles pointing at Seoul, and about a million or so soldiers ready to invade through underground tunnels at any given time. North Korea's defeat would be inevitable - but they would take a lot of South Korea down with them.
(And also tons of innocent people would die in the aftermath, and the refugee situation would be horrendous.)
Still, the leadership of North Korea knows that they'd be wiped off the map in an actual war - even if they were only captured, they'd face lengthy imprisonment or execution for crimes against humanity (if you want to sleep well tonight, don't go looking up descriptions of NK's concentration camps - trust me). So why are they acting like they want to go to war?
The key word there is "acting". It's a show. The ruling elite of North Korea are pretty comfortable - they don't want to lose that. However, they do want concessions. So they act crazy on the world stage. The message is clear: "Hey, if you guys don't send us some more aid, well, who knows what could happen? Maybe we'll actually do it this time. Better not chance it!" They're fishing for appeasement.
There's also a lot of other stuff at play here, too. North Korea is antagonizing the rest of the world to its people so they keep in line; sure, you may be starving, but the rest of the world is even worse! Some also speculate that Kim Jong-Un is trying to solidify his support among the country's military elite. If he can't show them that he's strong, well, they might decide that it's time he got replaced. Others are suggesting that the North Korean government wants 1-on-1 talks with the United States, something they think would legitimize them more on the world stage. Maybe Kim Jong Un just wants to know how far he can push the US without retaliation for future reference.
TL;DR: If North Korea actually wanted war, they wouldn't be telegraphing it like this. They pull these stunts all the time - they'll back down eventually, and then they'll do it again, as they always have.