Basically he says that he doesn't like the Defense of Marriage Act but that doesn't mean he supports gay marriage on the federal level. His logic is that "traditionally", marriage has been handled by the states.
As regular readers know I don't like that argument. Traditionally, states have made a lot of stupid laws that restrict people's rights and limit liberty. And banning gay marriage is one of them. Given that fact, why should we keep letting them make laws like banning gay marriage? I'm kind of appalled that a Democratic president in 2011 just made that argument. Its the same argument that the Confederation was making leading up the Civil War and during the Jim Crow era.
Surely after those experiences you need a better argument than, "Well, traditionally states have decided the issue". Tradition for the sake of tradition is dumb. Allowing the restriction of rights simply because a state has always said it wanted to is ridiculous. My guess is that Obama is just full of shit and doesn't have the courage to fall in line with his party, and really most of the nation. While Andrew Sullivan may be right that he is leading from behind on this issue like he has on others, that is just unacceptable to me.
This kind of problem with states restricting rights was foreseen by James Madison. I've finished about a fourth of the book "Madison and Jefferson" and the authors document that Madison feared the power of states after seeing what was happening in his home state of Virginia. And thus at the Constitutional Convention he proposed limiting states' rights. Sadly he didn't quite get what he wanted and we had to fight a civil war to prove that states needed better policing by the federal gov't (don't mistake better for total, see the federal gov'ts horrible drug policies). While the circumstances aren't as dire as they were back then, its still kind of sad that we are still having these federalism arguments.