The relevant parties, i.e. the state government did not choose to appeal the district court's decision. And yes, that is a bit of dirty pool in a way, for getting out of acts of public democracy you don't like. That's a major reason why the 9th Circuit DID let the current appellants intervene and carry on with the case. SCOTUS plainly thinks that decision should still be addressed. The last time a situation like this came up *as was mentioned earlier in the thread* SCOTUS didn't make a definitive ruling but did suggest they did not really like the idea of such private-party intervenors having standing.
Also the case isn't invalidated, the 9th Circuit's decision is invalidated. Two different things. The case still stands, as decided earlier by the District Court. It's just that since the district court is a lesser court its decisions are consequently weaker. The law is struck down but there's nothing to say the exact same law would be struck down if it were passed again. The judge who made the ruling has retired and there are several other federal district courts covering the state where a new challenge can be filed as well.
All district courts are equal. They cannot restrict their fellows with their decisions. While a judge would presumably rule the same way as he did before if an identical issue were brought before him as one he'd already made a decision on, the same does not hold true for other judges in other district courts, they are under no obligation or expectation to be consistent with another's ruling. They are expected to rule in consistence with the rulings of relevant higher courts. I.e. the Circuit Court of Appeals that has sway in their area and with SCOTUS. The Appellate Courts are built along similar lines*. The 4th Circuit Court is the equal of the 9th Circuit and so on and as such is not bound by an obligation or expectation to make its rulings consistent with the 9th's rulings but it does have to be consistent with courts higher than it, i.e the Supreme Court. A good deal of what SCOTUS does is step in when the divisions between different Circuit Courts grows too large and make a definitive decision informed by the different interpretations and approaches developed by the separate Circuit Courts.
*Similar but not identical. District Court cases are heard by a single judge while appellate cases are heard by three-judge panels and decisions by those three judges may be overruled by the appellate court acting as a whole making what is known as an en banc decision. En banc hearing are somewhat discouraged but play an important part in keeping the larger Circuit Courts (like the 9th, which has 29 judges sitting on it) internally consistent with their rulings.
So if the only relevant decision for this case ends up being Judge Walker's District Court ruling then yes the decision is only really relevant and binding on the parties to that specific case. One of those parties happening to be the State of California. But since District Courts create no precedent when they make original declarations on constitutionality it kinda lacks weight. Prop 8 would no struck down but could just get reenacted.





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