It's Cameron's attempt to stop the massive outflow of members from the Conservative Party to the UK Independence Party (UKIP).
It's hard to find a balanced view on this as most commentators are biased towards or against the EU, and most reports are at best misleading; they confuse many aspects of the European Union.
My attempt at a dispassionate description:
Primarily it was established by Ze Chermans and the French as a free trade area to promote regrowth after WW2, with the added subtext of a) avoiding another war, and b) subsidising France's mediaeval peasant agronomy.
In order to make these work it established a parliament (elected) to pass laws to promote the common good, a council (unelected) to administer it, and a court (unelected) to enforce it. The vast majority of people confuse these 3 bodies, either through ignorance or malice.
In recent years, they introduced 2 new features that the UK declined to join: Monetary Union and the Schengen Agreement (allowing free movement of people across borders without passports).
The pro-european lobby holds that the benefits (significant exports to EU countries helped by tax breaks etc.) outweigh the disadvantages (an inefficient bureaucracy and the risk of financial instability wandering across borders from corrupt south and east european nations.)
The anti-european lobby (including UKIP) are adamant that we don't need the free trade area as we're big enough without it, and further, the influx of foreigners and the outflow of money to the European Commission do significant harm to our economy.
Both of those arguments have a basis in fact, but the pro-euro argument is mostly in the hands of the Labour Party who are as rhetorically gifted as varrus and as concise as gbaji (I know, pot, kettle, tl;dr).
UKIP are a single policy party (get us out of Europe, Britain for the British etc.) who have to date mostly recruited from the far right. In recent years, the pro-euro argument has been so badly communicated that the UKIP message has gained support from many traditional Conservative voters.
In short, it's a stunt by Cameron whose economical advisers are briefing that even to call for a referendum will cause enough uncertainty to turn this into a triple-dip recession. His political advisers, however, have convinced him that most voters know too little about europe to challenge his statements.
Oh, and his announcement is for a referendum after the next election, if the Conservatives win, and if he's still party leader then. No chance of that happening.
"I started out with nothin' and I still got most of it left" - Seasick Steve