For me at least, the first I'd heard of "retention funds" was a mention of it in Graham Zusi's new contract.
At halftime of the Chicago/SKC game Alexie Lawless dug into it and this is what I caught.
1) enacted at end of 2012 but not announced (still not really announced as far as I can tell)
2) an additional $225k to be used on up to 3 players
3) funds last for 3 years (i.e. I took this as 225k for the next 3 years, not 225k per year).
Assuming this is true... nice way to to go resign 2-3 of your good players with a good bump that doesn't hurt your salary cap.