Well, it happened; the Indians have extended CC Sabathia through 2008. Think of the new deal as a two-year deal; Sabathia's current contract, which runs through 2006, will be kept intact. The 2007-2008 portion of the contract pays Sabathia $17.75M plus incentives. Those two years are important, because they are "free agent" years.
The breakdown by year:
2005 - $5.20M
2006 - $7M (option picked up)
2007 - $8.75M (free agent year)
2008 - $9M (free agent year)
Sabathia can also earn incentives during the last three years of the contract, and can make as much as $11.75M in 2007 and 2008.
For the Indians, this is not only a good deal financially, but an important turning point in public perception of the franchise. While the team gave out long-term deals to Travis Hafner and Victor Martinez, this deal is a much more important one because Sabathia would have been able to walk after the 2006 season. For a fan of a team who lost home-grown talent like Jim Thome and Manny Ramirez to free agency, today is a great day.