I couldn't find the information anywhere, and digging through the JavaScript code didn't help me much either. However, from experimentation it seems:

• Large: All really large pictures. Smallest dimension I found is 900 x 900 pixels, but I've seen pictures with width/height of 500 or so pixels (they were balanced, however, with a height/width of 1k+).
• Medium: Includes some of the "Icon" images and scarce "Large" images (i.e. 1920 x 1080 px), but generally anything in the range of 300~500 pixels (although very frequently higher).
• Icon: Ratio is always 1:1 (width == height). Largest dimension I've seen is 512 x 512 pixels.

I believe it goes by the area of the image, but it's nowhere to be easily found.

There doesn't seem to be any way to save Google Image search preferences, even when logged in to Google, which is a bit strange. I would have thought this would be something that a lot of people would use.

Anyway, you could probably create a little piece of JavaScript and add to your toolbar as a bookmarklet to do this.

Something like this would work:

javascript:(function() {  
var searchTerm = prompt("Enter search term:","");
searchTerm = escape(searchTerm);
var url = "http://www.google.com/search?q=" + searchTerm + "&tbm=isch&hl=en&cr=&safe=images&orq=dog&tbs=isz:lt,islt:vga&biw=1280&bih=";
window.location.href = url;
})();