I may be missing a lot of details on how YC works, but it seems pretty straightforward to me: you're still the CEO. YC invests $120k and an additional $30k, or so, of intangibles, but they don't take a board seat nor a controlling stake in your company. That is, as CEO, you could decide that the best thing to do to improve your company's prospects is to pay yourself $120k for 3 months of work. But, more realistically, you'd probably pay yourself a minimal amount to cover 3 months cost of living in SF (probably 10-15k) and then spend the other 75k (after taxes, etc) on things that give your company most bang-for-buck.

So, on day 1, YC assumes that you (a relative unknown) and your initial idea (probably unproven) are worth about $2M (investment of ~150k for a 7% stake). Seems pretty good to me. And, of course, if you believe that you and your idea are worth more than that, you could always self-fund or seek other funding sources.