Land that is an important, if small, buffer against surrounding countries that only want to destroy the Jews, even.
A lot of people won't be happy until all of the Jews have been completely annihilated. Giving them that land is only going to enable more anti-Jewish violence.
You get these wacky notions floating around unchallenged in Israeli and pro-Israeli circles, but if you want to understand why things happen the way they happen in the real world, you have to discard them and start looking at things in terms of something vaguely resembling reality.
The number of people who are dedicated to annihilating all the Jews is effectively nonexistent. The number of people who are dedicated to destroying the state of Israel (not, you may notice, the same thing as killing all the Jews) is somewhat larger, but still negligible. The number of people that hate Israel for reasons irrational, rational, or a mix of both in the Arab world is bigger still, but to suggest that the idle political leanings of a guy on the street of Amman is the same as an entire middle east frothing at the mouth to wipe out Israel is absurd. Basically, this kind of idea can be perpetuated so easily because the people who toss it around have no idea what they're talking about, and certainly haven't been to any Arab countries or even Arab towns in Israel.
And by the way, the huge majority of the borders of the territory Israel controls are with countries Israel is at peace with. If you don't know what I'm talking about, you're out of your depth. Then, within the territory Israel controls, there's the bizarre quasi-border with the West Bank, except that even the Israeli government solidly refuses to define where any such border might be, except by where they've put the separation barrier. The entire rest of the planet including the Palestinians (even Hamas! Holy crap!) is in agreement about where that border ought to be, and that's specifically what Obama's talking about here, and the fact that the border is ill-defined isn't the fault of anyone but the Israeli right wing and the settler lobby.
So now that this nonsense is put aside, we can begin to discuss why Obama might "pull the rug" on Israel. First, let's establish he's doing nothing of the kind: he's pandering to a number of Netanyahu's ridiculous demands. One, that the Palestinian state be demilitarized. What an absurd double standard! Two, that Palestinians recognize Israel "As the home of the Jewish people." The PLO recognized Israel two decades ago; the demand that they update that to say "as the home of the Jewish people" was introduced very recently when Netanyahu realized peace negotiations were dangerously close to producing some kind of forward progress. It's purely semantic, stupid (wait, so Israel needs its alleged enemies to validate what it is?) and purely intended to both prevent progress and, if the PA were to do it, to give future Israeli administrations something to point to whenever refugees (who didn't vote for the PA and thus aren't represented by what it does anyhow) demand their right to return.
Finally, as long as Obama keeps up the alliance, huge amounts of economic and military aid to Israel, and continues blocking any attempts to censure them in the UN Security Council, two things will be true: One, he will be doing anything but "pull the rug" out from under Israel, and two, no progress will ever be made. The comparison is often made to Bush I, who knew how to apply pressure to hardline Israeli governments like the current one: Suspending handouts, at a time when they were facing huge amounts of immigration; and then when AIPAC went nuts, complained publicly about the huge amount of lobbyists employed. What happened? Israelis ditched Shamir and elected Rabin, who went on to accomplish something. Except then the same right-wingers who are obstructing progress now, shot him dead, and accomplished their own goal of maintaining the status quo. If Obama knew how to do the same thing, we might start to see something happen.
The final, and biggest, concession to Netanyahu, is continuing to say he won't support unilateral Palestinian moves to declare statehood. Coming from the president of a nation whose entire reason to exist is built on the foundation of the right to self-determination, this is insanely hypocritical, but hardly the least hypocritical thing an American president does. Still, when the entire rest of the world is moving towards supporting the Palestinians in this move (since they see Netanyahu's stalling and stonewalling tactics for what they are) he's just painting himself as more and more of a slavish lackey of the pathetic prime minister who literally hasn't done anything in his entire second tenure in office and who is regularly humiliated by his own unruly coalition partners.
This isn't intended for the OP, of course; anyone who in all seriousness can't distinguish between the Palestinian move toward statehood and some kind of terrorist plot against Israel isn't going to be able to take part in a reasonable discussion of this issue. But it should give some on-the-ground orientation for everybody else.
As for the part about Israel not giving up the West Bank without a literal fight - probably true. And even if the IDF isn't fighting, the settlers sure as hell will. Ideally, the IDF would be sicced onto them to siege them out, but pigs will fly first. More likely, the state of Palestine will be declared, and Netanyahu will be like "OK, make us leave." Then nothing changes, but more and more countries start sanctioning and isolating Israel, and this process drags on for decades, hurting the Palestinians most of all, ironically. From there - who can say? Bombing Iran will absolutely 100% become part of it at some point if Netanyahu has anything to say about it.
Edit: I just heard a speech clip. Fortunately, there's one insane Netanyahu demand he's not bowing to - the one about Israel keeping the Jordan Valley (i.e., turning the "state of Palestine" into something like an Indian reservation)