ICOCA (イコカ / Ikoka) is a smart card—issued by JR West  and mainly sold/used in Kansai region (関西)—has the following characteristics: 

• A prepaid card (or stored-value card) rather than a rail pass

  • Provides convenience over payment by cash

  • Can be used in many places (click here to see where it can be used)

    • For not only JR trains but also Osaka subway, Kyoto subway, most of private train companies (Hankyu, Keihan, Kintetsu and many more) and even city bus in major cities, like Kyoto.

    • For shopping in kiosk in the station, nation wide convenience store (Lawson, Family Mart, Seven Eleven) and even some of major electronics retail store.

    • Accepted at other major cities, like Tokyo, Sapporo, etc

• Only used as fare ticket (乗車券 /  jōshaken)—for passing the ticket gate and for ordinary fare (i.e., non-reserved travel)

  • You can have a commuter pass (定期券 / teikiken) added to it. 

  • For the following faster train services, you need a separate ticket (or an additional surcharge) which can be purchased from the conductor on board the train 

    • Shinkansen (新幹線)

    • Express services

      • Such as Haruka service from/to Kansai airpor

    • Travel on a reserved seat of a limited express train

    • See other examples here

  • Note both express trains and ordinary trains share the same boarding gates (or ticket gates)

    • In short, the fare ticket (乗車券) allows access to the train platforms at entrance and exit, where it is inspected by the gate or attendant at the station, while the express ticket allows one to ride an express train over the interval and is inspected by a conductor on the train.

• Expiration date

  • Remaining money on the card expire only after 10 years

Note that there are other stored-value cards such as Pasmo, Suica, etc. Since March 2013, major 10 different IC cards were standardized and become inter-operable.[1,2] In my own experience, I was able to use ICOCA card in both Tokyo and Hakone areas on both trains and buses without issues except once when I tried to charge my ICOCA card at Hakone-Yumoto Station via the vending machine. My ICOCA card was not recognized by the machine. However, I was able to get it recharged through the "Fare Adjustment" personnel at the station. 

References

1. IC Cards 

2. Mutual use of transportation IC cards

3. Tokyo Travel —Knowing about Yamanote Line 山手線