So I was very pleased to see this article at baseball prospectus (must be subscribed to read). Short version: The Red Sox have decided That Jed Lowrie is fully capable of being their everyday SS next year; they will shop Julio Lugo in the offseason.
Lugo hit .268 with just a .685 OPS in 261 AB this year, and committed an atrocious 16 errors while looking simply lost in the field. He's currently on the DL with a hamstring injury, and may not return this year.
While I respect Lugo's dedication - he really plays hard every day - he simply isn't good enough any more to be a starting SS. MAYBE in the NL, but not for the Red Sox. A guy with a career OPS+ of 88 needs to provide stellar defense, and Lugo can't even do that. But Lowrie has been solid defensively, and has hit .299/.364/.474 in 154 AB. I have to say, seeing Pedroia/Lowrie as the Red Sox' middle-infield combo for the next 4 seasons (until Pedroia's a free agent) sounds very pleasing.
The Red Sox would have to eat most or all of Lugo's salary, but I look at it this way: they'll be paying that money anyway. If the better player is taking the field, that's the important thing. So if the Sox can send Lugo away, pay most of his salary, get a decent prospect in return, and play Lowrie, it's better than giving Lugo starting time, or having him angry while sitting on the bench.