Definition
The Independent Chip Model (ICM) is a mathematical model used in tournament poker to calculate the real monetary value of chip stacks based on the prize structure and the remaining players. In a tournament, chips don't have a fixed dollar value — the first chip you have is worth more than the last chip you acquire, because the prize pool is not winner-takes-all.
ICM calculations show that doubling your chip stack doesn't double your tournament equity, while losing all your chips eliminates you entirely. This creates situations where folding a mathematically profitable hand becomes correct when the chip loss would be devastating to your tournament equity — particularly near the bubble or final table.
ICM is most relevant in tournament situations with large pay jumps: the money bubble, the final table bubble, and when very large differences exist between adjacent pay spots. Many solvers like HRC (Holdem Resources Calculator) specialize in ICM calculations for tournament strategy.
Example
In a 9-player sit-and-go near the bubble (4 players left, 3 paid), your A♥K♦ versus opponent's A♠A♣ creates a spot where the "correct" ICM play might be to fold — preserving your position above the bubble — despite having a decent hand.