I see you're new to pixel art, so don't worry too much about things not being accepted just yet. Have a look around the site and find pieces you like, study them, work out what it is about those pieces that makes them good.

I recommend having a look through this thread, it has a lot of interesting information and I would also recommend starting up a WIP thread in the forums.

Anyway, yes, it was sent back for quality reasons, as stated. It looks very unrefined (the outline is particularly jaggy) and over-dithered, thus making it very noisy and hard to read.

I like this piece from the gallery:


It's a similar size and has a sort of similar subject matter. There's no dithering and it conveys a gooey/slimy feeling. However your piece, despite being a worm, comes across as being quite brittle and rough due to the heavily dithered texture.

Did you use a reference for the worm? If not, and you wish to continue working on this piece (even though the challenge is over), google images is a great start. Here's a couple of images I found which I think could be useful: this and this (pile o worms).

Anyway, try starting a WIP thread and continue working on this, or if you feel up to it, perhaps you could try entering this week's challenge.