Well said.
So as an example, if we say Dareus got a $25 million signing bonus, Dareus gets all of that bonus right up front when he signs the contract, but the Bills get to spread it out over the life of the contract. I don't recall, but let's say the contract was for 5 years. So the Bills get to average that out and count $5 million of that bonus against the cap for each of the 5 years of the contract.
If Dareus is cut or traded before the end of the 5 year contract, all of the bonus money still needs to be accounted for. Dareus already received the whole sum ($25 million) up front, but all of it needs to be accounted for in the cap. Let's say in this instance Dareus is traded after the 3rd year of the 5-year contract. That means the bonus that was supposed to be spread out over years 4 and 5 of the contract ($5 million each year, or $10 million total) automatically get lumped onto the Bills cap for the following year (in this case, year 4, the year after he leaves).
So that's considered dead money -- here, $10 million of the Bills cap counting towards someone who is no longer on the roster. On the bright side, we don't have to count his salary against the cap anymore, so there are some overall cap savings over time.
(The exact numbers are different, of course, I just don't know the details.)