From BR Bullpen
The Restricted list is a compendium of players who are out of organized baseball but are not free agents. A team can request that a player be placed on the restricted list if that player has left the team without a valid reason, or has announced his intention to retire but is still of an age or level of skill that could allow him to return to professional baseball in the future. In effect, the team states that it retains rights to the player if and when he becomes active again. The list is also used to place a player who is unavailable to play for non-baseball reasons, such as personal issues or trouble with the law.
A player on the restricted list cannot be signed by another team unless compensation is paid to the team who placed him on the list. The list is honored throughout organized baseball and in leagues that have working agreements to respect the contracts of organized baseball, such as Nippon Pro Baseball. The list is most often used today when a player retires at a young age without receiving his unconditional release. If he decides to return to playing, he must do so with his last team, unless a trade or other deal can be worked out. Salomon Torres is a recent case of a player who spent a number of years on the restricted list before returning to organized baseball.
In the past, the list was used for players who jumped from their contract to sign with an outlaw or independent league. The move signaled to other teams in organized baseball that this player was not free to return to another team and that the provisions of the reserve clause were still in effect in his case. The restricted list is also used on International free agents pending standard MLB investigation.
The restricted list is sometimes confused with the disqualified list, which is used as a form of disciplinary action.