He has a questionable knee. One bad thump and he may go down for the season. It is a definite risk for that much money. You are probably right thinking the contract is is loaded with incentives.
http://www.realfootball365.com/nfl/articles/lavar-arrington-redskins070306.php
Excerpt:
Originally marketed as the face of the Redskins, Arrington earned a large legion of fans, on his way to three Pro Bowl appearances. But his learning curve suffered, as the Redskins shuffled through five defensive coordinators in five seasons. When Gibbs returned to coach the team in 2004, Arrington played well in four games, but his season was cut short by a knee injury. He then underwent two operations before returning for the 2005 season.
Unfortunately for Arrington, he was not welcomed back with open arms. A contract dispute with owner Daniel Snyder was partly to blame. But he also became aggravated by the team’s reluctance to play him. Some reports indicated that Arrington needed more time to heal, while others pointed to a freelancing style that did not fit the Redskins’ plans.
Nevertheless, Arrington showed progress in the latter stages of 2005. In his last four games, the former Penn State All-American recorded 20 tackles, a fumble recovery and an interception. He also helped lead the Redskins to their first playoff appearance in six seasons. At the age of 27, Arrington is still considered a young linebacker. If his knee checks out, he should draw free agent interest from teams who can afford him.