Despotism is an umbrella term that describes any form of government in which all political (and usually economic and even judicial) power is vested in a single authority, either an individual (Absolutism or Autocracy) or a close group of despots (Oligarchy). Traditionally, this authority weilds absolute power - the desires and instructions of the despot(s) are above all other interests, with the despot representing the State itself. Authoritarianism at it's most extreme degree, Despotism does not necessarily refer to a system of oppression and disregard for the interests of the people. It is possible for a despot to be democratically elected and for a despot to rule benevolently.
Classical despotism is an unpopular choice of micronational government, even in it's Oligarchic form, with most citizens wanting to be actively involved in their government somehow. Despotic states usually experience terminal inactivity and subsequently dissolve themselves, all though a handful have managed to survive effectively. In oligarchic despotism, the system also cripples the capacity for reform if enough of the ruling despots do not agree with such reforms. Similarly, despotic states are more likely to experience a fatal revolution than other states.