$13 mil a year isn't exactly an insane contract. No one expects him to hit 50 HRs again, and he's not getting paid like the Jays expect him to. There are signs that his power (at least, some of it) is sustainable - reports of getting a mechanical flaw fixed right before he started hitting for power about a year-and-a-half ago. It's a calculated gamble, but one that AA has to take in order to compete in the AL East. If it works out, it helps the Jays; if he hadn't signed Bautista and Bautista cranked 30 HRs, the Jays wouldn't really have any chance of building a contender; and if it doesn't work out, well the Jays probably wouldn't be a contender without an effective Bautista.
Also, Youkilis never eclipsed 16 HRs before his breakout (powerwise) 2008, and he was rewarded with a contract after that year. Obviously, it's not the same situation as Bautista (less money, fewer homeruns, better defense) but it's not impossible that Bautista just found his power stroke later in his career.