The Cardinals signed free agent 2B Adam Kennedy for a very reasonable three years and $10MM. As he is just a Type B free agent, the Cardinals will not lose a draft pick. The Angels gain a sandwich pick though.
With a "free" source in hand, I'll provide a synthesis of the two.
Elias ranks the available free agents in a Rotisserie scoring method for various categories with the ones deemed best getting the most points in each category and the worst getting the least. Type A free agents are in the top 30% of these relative rankings. Type Bs in the 31-50%, and Type C worse than the median.
When a Type A is signed, the player's new teams loses its protected first round pick. If it is in the top 15, then the signing club keeps its first round pick and surrenders its 2nd round one. This is why the Cubs get Soriano and keep its #3 with the option to sign whomever the DRays and Royals pass on due to money demands. The team that lost the free agent also gets a sandwich pick between the 1st and 2nd rounds.
Type B free agents get their previous team a sandwich pick, but his new team doesn't surrender its pick, and Type C free agents do not have any pick compensation attached.
When teams sign multiple free agents, they lose their next round pick and the team whose free agent was higher ranked gets the higher draft choice.
Players are broken down into five groupings and then the classification into type occurs. They are catchers, starting pitchers, relievers, infielders other than 1B and 1B/OF/DH. The catchers and infielders other than 1B have a couple defensive ratings.
By classifying first and then assigning types, a relatively weak grouping will still have Type A players i.e Danys Baez, who had poor seasons. This is the equivalent of a keeper league auction that is weak on a position like catcher and the best catcher relative to those available automatically gets a $20 bid. While the more abundant OF who bests that top catcher's stats gets a $5 one because there are so many better OF available to draft.
Here is a list of the free agents and types by classifications. (I should have used 1B Kevin Millar in my examples.) he's a Type A!)