The Colts have been decimated in the secondary this season, and Hamlin will bring a nice veteran presence in at this critical point. Don't use him in IDP Fantasy play, however
The Cowboys cut Hamlin back in April, a move many Cowboys fans considered odd at the time because Hamlin was the starting safety of a Dallas defense that, in 2009, was second in the league in scoring defense (allowing just 15 points per game).
In 2010, the Cowboys defense ranks 31st in points allowed, giving up 28 a game, including 31 passing TDs.
[UPDATE]: Report confirmed by NFL.com. Also confirmed, Austin Collie to IR.
The reasons for cutting Hamlin, who made the Pro Bowl in 2007, had more to do with money than anything else. From Dallas Morning New writer Todd Archer:
Hamlin was scheduled to make $5.596 million this year with $1.09 million guaranteed remaining on the contract he signed in 2008. Hamlin joined the Cowboys in 2007 on a one-year deal and made the Pro Bowl after picking off a career-high five passes and making 102 tackles.
Since signing the six-year, $39 million deal, Hamlin had just one interception. His value was more as a quarterback presence in the secondary than a playmaker the last two seasons.
From the DallasCowboyTimes.com:
The Cowboys cut free safety Ken Hamlin this offseason for one reason–he did not make enough big plays.
With so many injuries in the Colts' defensive backfield, and with current starter at strong safety Aaron Francisco essentially just a warm body back there, even a 'quarterback presence in the secondary' such as Hamlin would be an upgrade. For Indy, Hamlin doesn't need to make plays. He just needs to cover, tackle, and not screw things up.
In 12 games for the Cowboys last year, Hamlin had 52 tackles and 2 pass defended. After Dallas cut him, he signed with the Ravens for seven games before being released.