In case you didn't know, the Red Sox are smart. Peter's going to cover the risk/reward involved for large market teams at a later date, so instead of harping on that, I'm simply going to evaluate the signings of Brad Penny and Josh Bard.
Penny's contract is for a base of five million and if he completes 160 innings that increases to eight million. A number of right shoulder pains limited Penny to an atrocious 2008. Thankfully, Penny compounded the issues by pitching through pain and seeing the worst season of his career, rather than taking some time off and letting his body heal. If you pin most of the ineffectiveness on his injuries, then you should expect Penny to perform similarly to his 2007/2006 self: ~180 innings, ~3.7 FIP. If that does happen, Penny will be worth more than double his actual earnings. Marcels says 4.11 FIP and 127 innings, which still puts the Red Sox earning money from the deal. That's what you call a good contract.
Bard had an unlucky time with batted balls last season, and ended up being exiled from San Diego. Bard's last stint in Boston ended abruptly due to his flawed handling of knuckleballs. George Kottaras figures to be the Red Sox's back-up catcher and he handled Charlie Zink in Pawtucket last season. Bard's only being paid 1.6 million, or a little less than a half of a win. Considering Bard has averaged a little over 1 WAR per season during his career, I think it's a safe bet to assume Bard will be worth at least 0.5 WAR next season.
Add in the fact that the Sox can simply squat on the deals if disaster strikes, and really, how can they go wrong here?