He has just discovered that Mr. Nathan Radley filled in the tree with cement, and he is upset at how cruel that was. Boo had been, for the past several weeks, extending a hand of friendship to the two children by leaving little gifts inside the hole in the tree. Jem suspected it was Boo, who had, the chapter before, kindly sewed up Jem's pants and left them for him at the fence, which helped Jem to not get into trouble for trespassing on the Radley property. The gifts that Boo gave were small, but moving; a perfectly whittled figure set of a boy and a girl that looked like them, chewing gum, and a pocket watch. So, Jem and Scout write a letter of thanks and go to deposit into the tree, only to discover the tree has been filled in.
Jem's crying isn't because he is sad to lose further gifts from the friend. It is because of the friendship that had been started between the kids and Boo, and Nathan Radley's cruelty in trying to stop it. And, he outright lied to Jem about it. He told Jem he filled in the hole because the "tree's dying. You plug 'em with cement when they're sick." Atticus confirms later that the tree was not sick, so Jem knows Mr. Radley was not only lying, but cruelly keeping Boo from finding happiness and friendship. And, just like Atticus, Jem appears to have his father's kind and sympathetic heart; he is upset that Boo has such a cruel father and has to live like that.