The 1" of fish per gallon is not meant to be held as gospel. It is a generalized statement intended to give those who are new or inexperienced in the hobby, an idea of proper stocking levels. As is obvious from your statement, there are exceptions to the "rule". The fish size refers to the adult (fully grown) size of the fish. A 10 g tank with a 1" baby tiger oscar in it is seriously overstocked. Other factors must be considered if one is to expect any level of success in the hobby. Factors such as filtration, territorial issues, aggression, breeding, and overall size of any given inhabitant should always be considered.
For the record, 1"/Gallon is the FW Aquarium guideline. The marine guideline is 1"/5 Gallons, and the Watergarden/pond guideline is 1"/sq foot of surface area.