12 tiles/city is more of a 'dense build'. ICS is more like 6 tiles/city. 4 is the absolute minimum possible I believe, so I would say 4-7 or 8 tiles/city is ICS. 9-15 is a dense build, 15+ is 'wide spaced', IMO. There is no absolute rulings on what constitutes the different city placement definitions, as everyone has their own opinions. OCP can be either taken very literally by meaning the exact placement like AlanH is describing, or can be defined more loosely as a 'wide-spaced' type of build.
The benefits of ICS:
1. Faster growth, like Dave said. 10 cities producing settlers/workers is going to get you more of them than 3 cities. this is more powerful on a huge pangea map with minimal civs where you can have a 'settler flood' of having 100+ settlers on their way to build cities. In the CFC HoF there was Aeson's deity game (63,000+ pts), and my regent game (nearly 27,000 pts) that incorporated this tactic.
Also, since the city center tile always produces 2 food, using ICS on desert, tundra, hills, etc. can add more food to your empire (the extra food helps in score, too).
Settlers don't have to travel far (often founding a city the same turn the settler was built if you had roads built ahead of time)-allowing cities to impact your civ growth sooner and sooner and if given enough room, this has a steamrolling effect a.k.a. 'settler flood'.
2. Free unit support (in despotism and monarchy. ICS will really kill communism, so don't do this in communism). 100 towns in despotism lets you have free unit support for 400 units.
3. Each of those cities producing a minimum of at least 1 gold/beaker and can provide more by making specialists in those cities (irrigate everything in those max corrupt cities). 100's of those cities can provide 100's and 1000's of extra gold/beakers per turn to your civ (if you don't build infrastructure in those cities that drains the profits).
4. Movement of units/defense. Units can easily go from 1 city to another to counter where you are being attacked from. Your opponent will take forever to fight their way through all those little cities, even if they are undefended, that your main army will have lots of time to react before the AI can ever reach your core cities.
5. Score/happy people. When connected to your trade route and these cities are so small they won't need temples, cathedrals, etc. to keep everyone happy. Since you don't need infrastructure you can spend everything on workers/settlers/barracks and military.
6. Power rankings as anarres described.
7. Gold. You'll make lots and lots of gold with ICS.
8. Corruption due to distance is lower, but corruption due to # of cities will hurt you more. In the early game, the distance corruption is what usually hurts me the most, so ICS has a powerful early advantage here.
9. Those 1-shield cities can build wealth, workers, settlers. Or if you have 100 of those cities building cannons then 40 turns later you have 100 cannons.
Edit: Almost forgot another good reason for ICS
10. Cultural powerhouse. Rush a temple or library in 100 cities and what do you think will happen to your civ's overall culture?