I'm not going to deny it, that was an awful result. Labour should not be losing seats like that full stop.
The incomparable Alun Ephraim (who has blogging privileges here) describes things in more depth in this thread. Join the site too, it's fun.
Al is right about the Scottish Labour Party. We've dominated the place so long, we've got fat and lazy. This will not do.
The biggest blow is in the psychological field. I'd say that the in-fighting and calls for Brown to resign will increase, which is not a good thing. Especially as it is now silly season (considering this warm weather, expect more bikini-clad students to grace certain newspapers).
Let's hold our horses for a while- at least until after Conference.
Edit- Al currently goes by the username "Sibboleth" on that site.