The answer is the salary cap. The NFL has a rule in their Collective Bargaining Agreement which restricts the total salary a team can have each year, to prevent teams from pulling a Yankees (er, Dodgers) and buying out the best free agents to build a championship team. So how does it work?
This year's Salary Cap
According to Michael Lombardi of NFL.com, this year's salary cap was $120.6 million.
Next year's Salary Cap
Lombardi also reported in the same article that the salary cap in 2013 was expected to remain stagnant, effectively staying at $120.6 million for another year.
What counts toward the Salary Cap?
Wikipedia has a good summary on these matters:
In transitions, if a player retires, is traded, or is cut before June 1, all remaining bonus is applied to the salary cap for the current season. If the payroll change occurs after June 1, the current season's bonus proration is unchanged, and the next year's cap must absorb the entire remaining bonus. If a player is cut, his salary for the remainder of his contract is neither paid nor counted against the salary cap for that team. A highly sought-after player signing a long term contract will usually receive a signing bonus, thus providing him with financial security even if he is cut before the end of his contract.
Incentive bonuses require a team to pay a player additional money if he achieves a certain goal. For the purposes of the salary cap, bonuses are classified as either "likely to be earned", which requires the amount of the bonus to count against the team's salary cap, or "not likely to be earned", which is not counted. A team's salary cap is adjusted downward for NLTBE bonuses that were earned in the previous year but not counted against that year's cap. It is adjusted upward for LTBE bonuses that were not earned in the previous year but were counted against that year's cap.
In other words, bonuses count towards the salary cap no matter what. But if a player is cut, his salary remaining is not paid and doesn't count towards the salary cap. If a player is cut before the season begins, his salary doesn't count towards the salary cap for that season.
As for Incentive Bonuses (things like, play 16 games or get 10 sacks), whether they are Not Likely To Be Earned or Likely To Be Earned is a detail that adjusts the cap up and down in little pieces each year. For our sake, we can safely ignore these specific incentives unless we are discussing an injury-prone player. For example, Shawne Merriman might be cheap to bring back under the cap due to his injury history. He could be offered several incentives that are considered Not Likely To Be Earned, and barely affect the cap for the year.
Either way, when we're writing our own offseason plans, it's okay to ignore specific incentives. Just give a player a slightly larger bonus to represent the potential incentives they may earn. Remember that incentives and bonuses always apply, and salary doesn't apply if the player leaves!
The Salary Floor
New in 2013 is a provision of the new CBA taking effect establishing a salary floor for all teams. Every team is required to spend a minimum of 88.8% of their salary cap each year beginning in 2013. This is to benefit players overall, who will be given more generous contracts, and to promote even business practices around the league. Any team that fails to spend to the salary floor faces heavy fines and the potential loss of high draft picks, so expect even cheapskate teams like the Bengals to shell out money next year.
"Rolling Over" cap space
Tucked into the CBA is a provision allowing teams to "roll over" unused cap space into the next year. When a team rolls, say $10 million over from one year to the next, their salary cap for that year increases by $10 million. Specifically:
Under Article 13, Section 6(b)(v) of the CBA, each team may carry over any remaining cap room from one year to the next. The written notice must indicate the maximum amount of cap room that the team wishes to shift from one cap year to the next.
According to Jason La Canfora, the Bills rolled over $19.3 million from their 2011 salary cap into 2012, giving them an adjusted salary cap of $134.8 million (after $5.4 million of cap reductions for "adjustments").
The NYJetsCap.com summary of Buffalo's roster estimates that Buffalo has $9.25 million in cap space right now. That means Buffalo could roll over up to $9.25 million into next year's salary cap. Of course, doing so would also raise the salary floor!
Final Word on Buffalo's 2013 Salary Cap Situation
Buffalo will face a salary cap of $120.6 million in 2013, which can rise up to $129.85 million if they carry over the maximum amount of cap space to 2013. Due to the new salary floor rule, Buffalo will be required to spend a minimum of $107.1 million to $115.3 million, depending on how much cap space they roll over.
In addition, as we look towards 2013, Buffalo appears to have $105.6 million (Updated 12/24/2012) in committed cap money for 2013, according to NYJetsCap.com. (Note that this amount is not the same as "Current Estimated Cash Spending." You can use up the cap space without actually paying a player money, thanks to some of the contractual nuances.) So Buffalo has between $15 million and $24.25 million to spend on free agents and draft picks this year - again, this is dependent on how much cap space Buffalo transfers over.
EDIT 12/24/2012: As more information rolled in about Kraig Urbik's contract extension, I have updated the information for our salary cap space in 2013. Urbik's contract is reported to cost Buffalo $2.05 million in 2012 according to Rotoworld, although the bonuses haven't been clarified fully.