Functionally, it'll operate in much the same way as FIFA's system. Players will start the game mode with a random pack of cards. The players on those cards are the players on your team. They'll mostly be the dregs of the NFL to begin with; as you play more and earn points, you can buy better packs of cards that will feature a higher calibre of player (they'll still be random cards, just, the more expensive packs will have better players in them).
Point being it spices up online gaming a little, creating random teams (to break up the monotony of people sticking with big/good teams), with the added compulsiveness of Pokemon-esque card collecting.
I've played the FIFA version, and it was pretty neat, though the downside was that the FIFA version cost money. The Madden edition, however, will be free, so the least you can do is check it out when it's released in January.
Madden Ultimate Team First Look [GameSpot]