Do not be fooled by a common misconception floating around about Spain: that 1-0, 2-1 wins prove that they have been underwhelming and they are not at their best. As the best team in the world and the European 2008 Champions, who have only lost 2 of their last 50+ games over the last 2.5 years, the expectation now seems to be that they dominate opponents who are perceived as weaker than them. As a result, when they beat Chile 2-1 and then beat Portugal 1-0, the lazy analysis is they Spain are underwhelming.
But this view completely misses the point. 1-0, 2-1 games show Spain's biggest strength: if they score first, they do not need to score again. It helps of course, but follow me for a minute. Spain are the best team in the world at keeping possession and controlling the ball. Even their defenders are incredibly skilled and comfortable on the ball, more so than any other team in the world. Whereas many defenders are eager to get rid of the ball, and panic under pressure and just lump it upfield or away from danger, Spain's defenders are incredibly comfortable on the ball and never panic. Together with their amazing midfield led by ball maestros Xavi & Iniesta (and Cesc on the bench), this makes Spain the best team in the world at keeping possession.
The result of this is that they are perfectly comfortable passing the ball around, keeping possession, and making the other team run their socks off chasing the ball just to try to win it back. If you watch closely, they alternate during games between 1) doing this to slow the game down, compose themselves, save their energy, and make the other team expend their energy and 2) attacking the defense and trying outright to score a goal
And their strategy becomes incredibly effective if and when they score first. Once they have a 1 goal lead, they are so calm, cool, collected, and controlled on the ball, they are happy to spend 50% of the time wearing down their opponents by making them chase, and the other 50% attacking their tiring opponents to try to extend their lead. This was evident against Portugal, and also in the last 5 minutes against Chile, where they weren't even trying to score but rather passing it around, and Chile couldn't even get a touch on the ball- they were chasing shadows, and Spain ran out the clock with ease even though they were only 1 goal ahead.
Of course, this strategy is not fool proof, and does not guarantee that an opponent will not come back to tie a game or even come from behind to win. But it does mean that coming back on Spain is harder to do than coming back against any other team in the world. This dynamic, combined with their absolutely ridiculous depth (Fabregas, Pedro, Navas, Valdez, etc, etc on bench!) and the fact that they have the best goalkeeper in the world to boot, is why I picked them to win this tournament.
They haven't won it yet, and still have a tough, tough road to go, and may in the end crash out, but I am very confident that if they score first, they will not be beat by Paraguay, Germany, Holland, or anyone else. On the other hand, this massive advantage is nullified if the opposition scores first. Just look at their opening match loss to Switzerland, where the masters of possession- not of outright attack- tried but could not find their way back against talented but far from world beating Switzerland. In their only other competitive loss in the last 3 years, they also fell behind at last year's Confederations Cup and failed to come back against talented but by no means world beaters USA. Spain outshot the USA 29-9 that day but crucially the USA scored first and went on to win 2-0.
So when you watch Spain the key to their games is simply who scores first. And if they score first, watch how cool, calm, and controlled they are on the ball and watch them alternate between wearing out their competition by making them chase the ball and attacking to try to extend their lead.
Also, this may well explain the absence of Cesc so far. With them playing as I have described in the last few games nursing a 1 goal lead, they need the possession, control, and wizardry of Xavi & Iniesta more than they need the attacking prowess and additional offensive creative spark of Fabregas. And this may be why Cesc stays on the bench in these situations. But if a match is tied or Spain are behind with 30 minutes to go, I bet you'll see Cesc come on.