It lowers the cap hit of a player. Every team has some allocation money and you can trade it as well. TFC did it with De Rosario years ago where his cap hit was about 400k but they used allocations to lower it to about 250-300k so that they didn't have to use a DP spot on him.
Anyway I just saw a report from the Toronto Sun that said the Bradley deal is actually close to being done and he could possibly be introduced on Monday with Defoe as well. They also said that they would either trade or loan out Laba to open up his DP spot. I like Laba but Bradley is just miles better and still only 26 so that's a very easy decision to make. Seattle did the same with Dempsey by loaning out Montero to open up a DP spot and now Montero has 16 goals in 14 games in the Portuguese league while Dempsey had 1 goal in 12 games for Seattle so hopefully it works out better for us if the deal does get done..