Tobacco is a dirty weed. I like it.
It satisfies no normal need. I like it.
It make you thin, it makes you lean,
It takes the hair right off your bean.
It's the worst darn stuff I've ever seen.
  I like it.
  - "An American undergraduate named Graham Lee Himminger in the Pennsylvania State University Froth, 1915", quoted by John Barth in the preface to The Sot-weed factor

Addiction is a loose term that means different things to different people. Wikipedia defines it as "an uncontrollable compulsion to repeat a behaviour regardless of its negative consequences." But people don't do things with only negative consequences. We eat chocolates when the immediate positive subjective consequences of the taste outweigh the known long-term negative ones.

Few would deny that a long-term heroin user or tobacco smoker experiences powerful cravings, that those cravings are both a physiological and psychological need that has been induced by, and is now satisfied by the drug and the feeling that it creates. Most people would have a great deal scepticism that "internet addiction" and "workaholic" are much more than metaphors, and are not really in the same category as hard drug addiction for most people who claim them.

We seem to be better disposed to calling the hook an "addiction" if it's not just all in the mind. If there is a physiological hook, a chemical dependency. The DSM-IV avoids the "addict" word, but goes some way towards making "dependence" a repeatable test.

chemical dependency is not as well-defined a term as addiction. Apparently the preferred terms in medicine are physical dependence and psychological addiction.

The criteria for physical dependence is the appearance of withdrawal symptoms. This is not actually very hard to meet - I've had strong craving and withdrawal symptoms when suddenly stopping heavy coffee drinking. Some drugs - e.g. laxatives - can have dependence without any psychoactive effects at all. The "no normal need" test is also an interesting addition. We don't consider air or water to be addictive, yet ceasing consumption of them causes drastic effects. They are "normal needs". Tobacco only becomes a need after you start using it.

Psychological addiction is harder to define. But revolves around when the rewarding behaviour (not necessarily a chemical here) fills a need that is not otherwise met, and becomes a compulsion. The medics like to say that substances differ in the strength of the physical dependence that they produce, but all are equally addictive. People may differ in their tendency to psychological addiction. Me, I don't know about the "equally addictive" part; I think I'd find a crystal meth habit harder to give up than cheesecake.

For counterexample, when opiates are prescribed for pain management, all the physical effects - tolerance, craving and withdrawal - are present, but there is not usually a dependence by the DSM-IV definition, or a compulsion to use the drug, hence no addiction.

Chemical dependence is perhaps a strong craving that is not purely psychological, is for a substance, and meets the criteria for dependence.

Sources: Wikipedia on "addiction"
John Barth: The Sot-weed factor