> How are these levels determined?

I have no knowledge of Google, but if L5 is the highest IC rank, then L8 will often be obtained through politics and playing the popularity game.

The U.S. corporate system is set up to humiliate and exploit real contributors. The demeaning term "IC" is a reflection of that. It is also applied when someone literally writes a whole application and the idle corporate masters stand by and take the credit.

Unfortunately, this is also how captured "open" source projects like Python work these days.