http://i64.photobucket.com/albums/h164/ayuthuya/07-12-2006/DSCF2778.jpg
Muay Thai guy here...
When I try to get hand combinations off on people, they often stick their hand in my face like that and I end up coming up short.
What are some counters for this? Gotta be a ton since I never see western boxers do it.
I would try slipping to the outside of his extended arm and shooting a left to the body, or slip to the inside and throw a right to the body.
That's really a terrible defense if your opponent can body punch at all.
There is a way to throw a right hook to the body from longer range without changing levels, especially when covering with a jab. I'd be doing that all day against that guy.
You could also go left hook to body after slipping past his hand.
Hit him to the body all day until he moves his elbows down.
Then hit him to the head.
BTW - That long range body hook without changing levels I spoke of is done a lot by Roy Jones, you can watch some vids and practice the mechanics. He's such an athletic freak he often leads with it, most people would at least need to cover with a jab. Though against that guy, anybody who's a little fast could probably lead with it...
If you're not a body puncher yet, make sure you aim high to the body, basically right under the pecs, that's where all the good stuff is, live, solar plexus, ribs, etc.
I'm from Muay Thai and a punch counter for this is to slip outside and right uppercut. You slip inside and if it's Muay Thai usually a knee will be coming. This punch defence is favoured by fighters who like to clinch & knee and good kickers.
Christ that guy looks like a douchebag...
This isn't a set position. It is a reaction to another movement.
The arm is extended to reach and grab to knee or to stiff arm and keep distance to defend a knee or elbow.
Slipping under for body shots works well as long as you don't let them use the extended arm to guide your head into a knee. 
I actually saw a guy use that a standard boxing defense in a Muay Thai fight. His opponent apparently wasn't a body puncher and was so shocked by this bizarre defense that it seemed to stump him for about a round and a half.
BTW, that is me in the picture. It was from 2006. My friend, Khun Kao, had me pose in a few traditional positions a paper he was writing...lol
Nice. I mainly asked b/c its something I see people in sparring use when I punch, and I've seen Buakaw and quite a few Thai fighters use it as well. Was mainly curious what the boxing purists would say about it.