Given that the US' stated policy is against settlement building, some have expressed confusion about the decision to veto. However, there are three major reasons the Obama administration is pursuing this policy.
1) They've learned to pick battles. In the wake of the generally defunct peace talks from late last year, the Obama administration has become much more cautious about the fights it picks in the Israeli-Palestinian conflict. Especially as the 2012 campaign begins to spool up, the cost of annoying Israel and the American Jewish community is not worth the benefit of sticking to the stated policy.
2) It gives the US an out with both Israel and the Palestinians. Offering to negotiate leaves the door open for the Palestinians. Threatening to veto save for an amendment leaves the door open for Israel. Furthermore, it leaves all sides with their dignity intact.
3) Destabilizing any more Middle East relationships would be a bad choice. Given today's violence in Bahrain, protests across the Arab world, and the awkward position the US finds itself in having supported a number of authoritarian leaders in the Middle East, the US needs all the friends it can get. I also suspect there is heavy intelligence sharing between the US and Israel right now regarding these protests. Making a difficult situation even more difficult by picking a fight with a stable and close Middle East ally like Israel would therefore be a sub-optimal policy choice.