The former Heisman Trophy winner ran for 673 yards and two touchdowns for the Miami Dolphins last season. Williams, though, totaled 1,121 yards and 11 touchdowns in 2009.
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Williams, who is 5 feet 10, 230 pounds, takes over for Willis McGahee, who was cut by the Ravens and later signed with the Denver Broncos.
"There's a lot of respect for each other, especially for his game and what he's been through," Ravens running back Ray Rice said.
After winning the Heisman Trophy at Texas, Williams was the fifth overall pick by the New Orleans Saints in 1999 in one of the most bold moves in draft history. Mike Ditka traded all of the Saints' 1999 draft picks to get Williams, as well as their first and third-round picks in 2000.
In 2002, Williams was traded to Miami for four draft picks, including two first-rounders. In his first season, he led the NFL in rushing with 1,853 yards.
"He's a pretty legit dude," quarterback Joe Flacco said. "He looks like a big, strong guy and not somebody that I think a lot of people want to get in the way of."
It was announced in 2004 that he tested positive for marijuana and he retired for a season. He came back in 2005 and finished with 743 yards rushing and six touchdowns.
But he was suspended for the entire 2006 season after the NFL announced he violated its drug policy for the fourth time.