In poker, ICM stands for Independent Chip Model, which is a mathematical model that approximates a players overall equity in an incomplete tournament. The ICM allows players to convert their tournament chip stack into a monetary value of their equity based on whats left from the prize pool. It is a way to estimate the value of a players stack at any given point in a tournament. The model assumes that all players have comparable skill, so that current stack sizes entirely determine the probability distribution for a players final ranking. The ICM then approximates this probability distribution and computes expected prize money.
ICM is important in tournament poker because it tells players what the real (monetary) value of their chips is while giving them a better understanding of the risk and reward in all stages of a tournament. It is determined by two factors: the chip stacks of the players left and the payouts. ICM can be applied to answer specific questions, such as the range of hands that a player can move all in with, considering the play so far, or the range of hands that a player can call another players all in with or move all in over the top, and which course of action is optimal, considering the remaining opponent.
ICM is not something to consider when playing poker cash games as the value of a players stack remains the same. In fact, a big part of a tournament strategy should involve using ICM at the final tables to manipulate situations to a players advantage. Making the correct ICM decisions comes down to understanding how chip stacks and prize pool distributions interact with each other.
