As appeared likely, the Steelers have applied the franchise tag to pass rusher LaMarr Woodley, according to the NFL Network's Jason LaCanfora:
The Steelers have officially franchised LB LaMarr Woodley, as expected. Will announce the move later today.
You can find some details here. Because of Woodley's low 2010 base salary and the 30 percent rule, it would have been very tricky for the Steelers to work out an extension. (Although it would be possible; they'd just have to give him most of his money via a signing bonus, rather than through his base salary. But then they would be giving him a massive signing bonus right before a season in which there might not be any football.)
In any case, NFL.com (linked above) notes that Woodley's salary will jump a huge amount as a result of being franchised.
Woodley would receive the linebacker tag salary, which is expected to exceed $10 million, but could argue that he deserves a hybrid end/linebacker figure like the one Terrell Suggs received in 2009. The defensive end franchise number is expected to come at more than $13 million.
Players usually don't love being tagged, but Woodley is young enough that he should still be able to receive a big long-term deal eventually. And who knows what will happen to franchise tagging under the new CBA. Hopefully, the Steelers will be able to sign Woodley to a long-term contract, and franchising him increases the chances that they will do that. He posted 10 sacks this year after having 13.5 in 2009, and is a key part of the Steelers' defense.