If it is determined that HMG [Her majesty's government] is unable to protect the information that we provide to it,even if that inability is caused by its judicial system, we will necessarily have to review with the greatest care the sensitivity of information we can provide in future
In other words: "Shut the hell up otherwise the next time we hear about a terrorist attack that's going to happen in the UK, we might just forget to tell you". This is not to say that the British government is spotless in this, far from it, but when you see how low our so-called "special relationship" with the US has brought us, it really is time we reconsidered how closely we want to work with a government with such low regard for the rule of law.
[Update]: This analysis is also valid -
If I had to guess here -- and it's only a guess -- it seems clear that the British Government does not want these facts disclosed. After all, Mohamed's allegation is that British government agents broke the law by collaborating in his torture. The British Government needs a reason to justify to its High Court concealment of the details of what was done to Mohamed, and being able to point to a "national security harm" from disclosure (i.e., the U.S. is threatening to cease intelligence-sharing) provides that excuse. Since both the British and U.S. Governments obviously prefer that evidence of Mohamed's torture be concealed, it is not difficult to envision the Obama administration happily cooperating (as the Bush administration did) by providing the British with whatever they need to justify ongoing concealment of this evidence (if you need us to say that we'll cut off intelligence-sharing with you in the event of disclosure, here's a letter saying that). In other words, this isn't really a case of the U.S. Government genuinely threatening Britain as much as it is the two governments collaborating to provide the British government with an excuse to justify concealment, on national security grounds, of the facts of Mohamed's torture.
The European Convention on Human Rights places a non-derogatable duty on the British government to protect all citizens and residents from torture, and to punish those who engage in it. Appeal to the Strasbourg Court is very likely to occur as a result of this, and the ruling is unlikely to be favourable to those in power. However, given the time necessary for such a decision to be reached, and high likelihood of a Labour defeat in next year's election, it may be immaterial at least in political terms.