The Washington Post's Jason La Canfora summarizes the move pretty well:
Washington's departure will save the team $4 million in cap space (a $2 million dead cap fee remains from a signing bonus proration, but his salary is off the books). He was very popular with fans and teammates alike, but could not get on the field with regularity and had a difficult time making plays in 2008.
Washington, who signed with the Redskins in 2004, probably had his best season in 2005 when he totaled 93 tackles, 7.5 sacks, three forced fumbles, and one interception. But since that season, his time on the field has declined; he played in just 14, 12, and 10 games in 2006, 2007, and 2008, respectively.
Still, Washington will be remembered for playing solid defense and providing lots of entertainment with dance moves like this. (Try to ignore the stupid fans in the background calling for Collins.)