My league is constantly evolving, but we're a a point now where it's becoming more and more fun.
First... we use CBS, which I highly recommend as the best site for fantasy baseball. It affords the best features and most customization around.
We have a $140 cap and you can choose to use all or none of that.
Basically, starting fresh with a brand new, full draft, everyone picks 25 players.
Each team can sign any player to any length contract that they want to. If a player is not signed to a contract, he is a 1 year free agent and goes into the draft pool the following season.
CBS has a player value list that is released every year (the 2011 list came out last week). The list is called "Auction Values" and it has a few different categories: Head to head, roto, AL or NL only, etc.
We are a head to head, mixed league, so we use that column to determine our amounts.
This year, the top of the list is Albert Pujols at $42.
So you can see how $140 can go quickly.
However, a couple owners have wised up and signed minor league prospects at $1 each and in a couple years, they're kicking everyone's tail with a low team salary.
We have a 3% increase for contracts. i.e., if you signed Pujols to 5 years his contract looks like this: Year 1-$42, Year 2-$44, Year 3-$46, Year 4-$48, Year 5-$50.
This helps keep things in check a little.
We also have a luxury tax for anyone that exceeds the cap. The tax is in the form of draft picks--but that's another story.