Button's current contract has an option where McLaren can extend it so that Button is there in 2012. Given that Button and McLaren are so happy together, I find it amusing that McLaren haven't taken up this option yet.
Instead they want him to sign a multi-year deal now because otherwise Ferrari could easily poach him in 2013 (and they would almost certainly pay him more). I think Button wants to keep his options open, which is a very sensible thing to do.