A few observations below . . .
1. I'm aware most people don't give a crap about the analysis, only the result. And then people wonder why the mechanisms for deciding critical issues in our society are so dysfunctional. Answer: because no one bothers to try to understand them, and because as elusive and long-term a concept as "legitimacy" is no longer a concern of a polity that cannot even trouble to educate itself in the basic mechanisms of its own government. So our democracy becomes like a car with no mechanic. We drive it every morning and expect it to work, and have no idea why it doesn't when it doesn't unless it is something fairly obvious like a blown tire.
1A. OK, that was just me being bitter about the universe generally. Back to the opinion.
2. The Court's holding is, on the one hand, very narrow with little or no implication for the broader question of same sex marriage, which the Court explicitly reserves for the future. However, anyone reading the decision will understand that it constitutes an invitation to bring the broader question in the Ninth Circuit.
3. Technically, the holding of the court goes like this:
a. In California, over time, same sex couples acquired all rights identical to marriage with the exception of the ability to call the situation where two same-sex consenting adults form a union under the applicable state laws "marriage."
b. The California Supreme Court decided that the California statute defining marriage as strictly between a man and a woman was inconsistent with the California state constitution, and that the justifications raised by the state were vitiated by the grant of marriage in all-but-name to same sex couples. California could not claim that withholding the title "marriage" from same sex couples protected any interest in procreation, child rearing, or allocation of property when California by law explicitly protected these rights for same sex couples who formed "civil unions." Accordingly, the California Supreme Court struck down the state statute.
c. In 2008, Proposition 8 was voted by the majority of the people of California. It amended the state constitution to restore the previous distinction between civil union, available to any two adults, and "marriage," available only to a man and a woman.
d. Held: Under the "Equal Protection Clause" 14th Amendment to the U.S. Constitution, a state may not make arbitrary distinctions in the rights of classes of citizens. Where a law deals with a "protected class" explicitly prohibited from consideration, such a distinction will face "heightened scrutiny" and will only be sustained on a showing that the law is necessary to serve a "compelling government purpose." Otherwise, a law making a distinction between citizens will generally be upheld if the state can demonstrate a rational basis for such a distinction. e.g., laws prohibiting convicted felons from voting, or receiving a benefit from the state, are generally upheld on rational basis because "convicted felon" is not a protected class and it is arguably rational to make such distinctions to promote a specific state interest -- even if you personally think it is stupid and has no evidence to support it. The fact that a law is stupid does not make it "arbitrary" in the legal sense.
e. In the instant case, Prop 8 removes the right to call the union between same sex couples "marriage," despite the fact that the civil union is legally identical in all respects. Particularly when the state acts to remove a right based on an arbitrary distinction, the law must serve some rational purpose. It does not do so here. There is no legitimate state interest in requiring same-sex couples to call their union "mug mug" instead of "marriage" other than to create a distinction traditional heterosexual marriage and same sex marriage.
f. The fact that this distinction is of long, historic origin and that the federal government and many state governments have not yet recognized such unions as "marriage" cannot, alone, serve as a rational basis for the State of California to actively remove the right to call same sex unions marriage. To do so is to acknowledge that the only purpose of Prop 8 is to recreate the arbitrary distinction between gay and lesbian couples and heterosexual couples for no other purpose than to preserve the distinction. But this is precisely the arbitrary distinction prohibited by the Equal Protection Clause regardless of whether those whose rights are curtailed are members of a protected class.
Along the way, the court denied the motion to vacate the judgment because the district court judge should have recused himself since, as a homosexual man in a long-standing monogamous relationship, he was a potential beneficiary of of the case and/or created an appearance of bias. This last is no surprise. Under the logic of movants, any heterosexual judge would equally be a beneficiary of the outcome by preserving the state "protection" of traditional marriage. This is why recusal in cases dealing with laws of broad applicability are not favored.
Personal analysis: I expect this to go to the Ninth Circuit en banc before it goes to the Supreme Court. In part that's because it is a split decision (one judge found that there was a sufficient rational basis with regard to the state interest that law would survive, being mindful of the deferential standard required by the rational basis test). But it is also because while the decision limits itself to California, it is clearly meant as a general invitation to other jurisdictions in the Ninth Circuit to bring similar cases -- particularly where states have civil unions that erode the purported state interest in encouraging traditional heterosexual marriage.
As far as rational basis goes, it seems to me a reasonable argument in light of Roemer v. Evans and a significant line of due process cases which stand for the principle that once a right is created, it cannot arbitrarily be taken away. It does create something of a logic problem here, in that amendment of a state Constitution is supposed to be one of the balances on the judicial branch's right of Constitutional interpretation. But eliminating the ability to reverse a state Supreme Court decision via amendment to a state constitution is not an implausible outcome under the Supremacy Clause if a right guaranteed by the federal Constitution is at stake.
As always, it is important to note that analogies to Loving v. Virginia are inaposite because Loving involved a protected class and therefore involved heightened scrutiny.