In this paper, our focus is on the influence of the solvent density on the caging, recombination dynamics, and the nature of the reaction coordinate of iodine in supercritical argon at pressures of 0-2500 bar. Femtosecond probing with widely tunable pulses allows us to directly resolve the geminate recombination of iodine atoms and the subsequent relaxation processes, A nonzero recombination yield is found at argon pressures as low as 200 bar, and this yield increases strongly with increasing solvent density. The mechanism involves recombination onto the A/A’ states. At high pressures, a large fraction of the iodine atoms undergo an ultrafast "in-cage" recombination which is measured on the subpicosecond lime scale at 2500 bar of argon. In addition, a fraction of the iodine atoms bleak through the solvent cage and begin a diffusive motion through the rare-gas solvent. Experimental evidence is presented and indicates that this diffusive motion leads to reencounters and subsequent recombination of the geminate iodine pair. This diffusive recombination occurs on a significantly longer time scale than the rapid "in-cage" recombination. The newly-formed iodine molecules undergo vibrational relaxation within the A/A’ state, and the dynamics of this process and its dependence on the solvent density are revealed. A key concept here is the solvent density-induced control of the rigidity of the first solvent shell surrounding the dissociating iodine atoms. As shown before [Liu et al, Nature 1993, 364, 437], such studies of solvation present a unique opportunity of examining the microscopic influence of the solvent structure on reaction dynamics in clusters and solutions.