From WoWWiki

So what is IC then?

The acronym IC stands for "In Character".

Basically whenever you are roleplaying you are "In Character". It is a good thing to note that when a person acts like a jerk or starts flirting with you, it may have nothing to do with the actual person behind the avatar, just how the character would act. It is wise not to become offended by anything someone does "In Character".