|You know how hard it is to find a picture of Nick with a bat?|
And, he's a servicable defender. According to the Fielding Bible, he was middle-of-the-road in terms of CERA and runs saved (ranked 18th), but in the top 1/3 of the league in preventing stolen bases with a 30% caught stealing rate (good enough for 8th).
So no, I don't know why he settled. Dave Cameron at Fangraphs advances a possible reason why the Padres priced him as they did. There could be another two reasons why the Padres locked him up for 3 years, but insisted on a club option only for 2015, and those reasons are Yasmani Grandal and Austin Hedges.
Hundley is good, but both of these guys project to be better. Each has half of the package - Grandal can hit a ton but is a work in progress behind the plate; Hedges is almost the exact opposite. If you could synthesize the two into Ausmani Grandges, San Diego would have the best catcher this side of Johnny Bench, but sadly that type of cloning technology is still several years away. This deal gives each player 2-3 years to fix their weaknesses before becoming the back-up catcher to Hundley and then the full-time receiver in 2015/2016.
It also means that, assuming one of them does supplant Hundley as the primary catcher between now and 2015, the Padres could bring Nick back as the back-up for a reasonable cost. That might be the best option for Hundley, who will be 31 in 2015 and likely not to get a big payout on the free agent market.