He was getting dominated by Serra. It would have better for ego had it been stopped but I can understand him tapping. It sounds like he was pretty messed up from the punishment.
From Serra's blog
Inside the octagon, when the referee says “Go,” you cease being friends, but once he tapped out, I wanted to make sure he was okay. They didn’t show it, but Pete was down for a little bit after that, and you never want to see anyone get hurt, let alone a friend.