Condense the space between bibliographic entries

As Andrew says, you can use natbib and then reset \bibsep:

\setlength{\bibsep}{0pt plus 0.3ex}

---

Without natbib, you can set \parskip and \itemsep to zero (they are responsible for the vertical space). It is advised to add some glue-stretch that can be used if necessary (this is what plus 0.3ex is for).

\documentclass[12pt]{article}

\usepackage{lipsum}

% ADD THE FOLLOWING COUPLE LINES INTO YOUR PREAMBLE
\let\OLDthebibliography\thebibliography
\renewcommand\thebibliography[1]{
  \OLDthebibliography{#1}
  \setlength{\parskip}{0pt}
  \setlength{\itemsep}{0pt plus 0.3ex}
}

\begin{document}

\begin{thebibliography}{99}

\bibitem{a} \lipsum[1]

\bibitem{b} \lipsum[4]

\end{thebibliography}

\end{document}

For those who are using BibTeX but cannot use the natbib package (thus no \bibsep), and has tried varous \renewcommand on \thebibliography and \itemsep (source), here is what I found that actually works in this scenario (source):

\let\oldthebibliography\thebibliography
\let\endoldthebibliography\endthebibliography
\renewenvironment{thebibliography}[1]{
  \begin{oldthebibliography}{#1}
    \setlength{\itemsep}{0em}
    \setlength{\parskip}{0em}
}
{
  \end{oldthebibliography}
}