As a nonmember observer state – akin to the UN status the Vatican holds – Palestine would not be a voting member of the General Assembly, but would have the right to apply for membership in UN legal institutions, including the International Court of Justice and the International Criminal Court.
It’s that eventuality – and the prospect of Palestine seeking to sue Israel over settlement construction or other issues it sees as violations of international law – that prompted Israeli and American opposition. Indeed, Prime Minister Cameron's condition for a "yes" vote is a commitment from the Palestinians not to seek membership in judicial institutions.
US Secretary of State Hillary Rodham Clinton reiterated US opposition to the Palestinian UN bid last week, insisting that negotiations with Israel are the only means of achieving meaningful statehood. This week the US publicly called the UN move a “mistake.”