Capture The Flag (CTF) is a specially designed strategic war-game that mimics the real world security challenges.
The following are two most common types of CTF contests:
Jeopardy: Teams have to solve a set of challenges from diverse areas such as Binary exploitation, Cryptography, Forensics, Reverse Engineering and Web application exploitation. The second round of InCTF is similar to this format.
Attack - Defence: In this format, each team is given a machine (or small network) to defend on an isolated network. They can connect their networks to game network through a Virtual Private Network (VPN). Teams score based both on their success in defending their assigned machine and their success in attacking other team’s machines. Each team needs to exploit the custom application services running at each team’s side. A team gains points by submitting the flags of other teams. Unethical behavior(for instance, bringing another teams machine down) is allowed. However, you will lose points for it. The final round of InCTF is similar to this format.
CTF-Time has a nice explanation about the various formats of the game.