Only your professor can say for sure. I agree it is not totally clear, though I think I understand it.
It certainly seems that he is willing to write a longer version of: "I taught this student Math 412, they did very well and I enjoyed watching their progress." This will certainly "count" as one of your required letters of recommendation. So all is well.
You should be aware, however, that "did well in class" letters are the lowest possible type of letter. See page 15 in this famous document for an explanation (or better yet, read the whole thing). But the basic reason is that such a letter doesn't provide much information beyond what's already on your transcript.
So in your professor's carefully-worded reply, he is stating that his letter will (1) not discuss any topics other than Math 412, and (2) probably not include an overall recommendation like "I recommend you admit this student." As such, this will be an extremely weak letter that will not really help you get admitted to grad school, other than by helping you meet the required number of letters. If this is a surprise, and you were expecting a much stronger letter, you can send a "thanks but no thanks" reply and ask someone else to write for you instead. Or if you want this letter anyway (because you don't have a better option), you can send a "yes please" reply.