The other 26 nations of the EU have all signed up in principle to an accord which says (a) legal limit of 0.5% of GDP for their deficits with sanctions cutting in at 3%, (b) European Court of Justice has power to enforce this, (c) issuance of bonds to be cleared through Brussels, (d) €200bn to be handed over the IMF, and (e) economic policy to be coordinated at the European level, ie, we see your budgets and can change them before your own citizens get a look in.
Agreeing to this accord would hand over another thick slice of sovereignty to Europe and Cameron declined. The other 26 all said yes, but some of them have to run it past their own parliaments which may be a whole other story.
The accords are supposed to be written into each member state's Constitution which is intended to bind their hands forever more. (We barely have a written Constitution so that would have been a bit awkward.)
This does turn the EU into 26+1 rather than 27 united. Historically the UK has always wanted to avoid this as it provides a forum for the others to do things we cannot veto. Although we would not be bound by a decision made at the "26" level, it could be imposed on us de facto.
If the Europeans want to legislate in an area where we have a veto they can just move the decision to the "26" inner circle. The new rule would then not apply in the UK but would apply to any British person or company as soon as they wanted to do business in Europe. Blocking decisions which harm our interests will become very difficult. We could be cornered in quite a nasty way.
And there is another issue: can EU institutions such as the Court of Justice be used to arbitrate on a treaty between 26 states? Surely an agreement from the 27 would be required for this. (Are British judges on the CoJ really going to be handing down judgements on infractions of the 26-state treaty? I cannot see the others being happy about that!)
Completely out of the EU we could simply walk away from any decision we didn't like. Since we have a massive trade deficit with the rest of Europe this gives us serious negotiating power. But bound by the "27" rules we cannot use this power. For example we cannot apply to join the North American Free Trade Association (NAFTA).
However, it remains to be seen how this whole thing will pan out. The accords may get watered down when they reach the national parliaments, and don't forget, the Irish get a referendum on any Constitutional changes - that's another can of worms to look forward to. It could all fall apart in the coming months. So Cameron was right to keep us out. Let's face it, they're never going to refuse us admission if we later decide we want to be in the inner circle.
On the plus side, the immediate objective of pacifying the bond markets has already been achieved.