Air Plasma Sprayed (APS) Yttria Stabilized Zirconia (YSZ) Thermal Barrier Coatings (TBCs) is a well-established technology in the gas turbine industry. A conventional APS TBC is a layered structure with heterogenous distribution of defects (microcracking, pores, etc.) which allow it to simultaneously possess low thermal conductivity and elastic modulus compared to its bulk counterpart. However, interfacial defects can be a source of delamination failure during thermal cycling. In addition, conventional porous coatings can experience sintering during sustained exposure, which augments failure through stiffening-induced delamination. Electron Beam Physical Vapor Deposition (EB-PVD) TBC coatings, due to their dense columnar structures, are less susceptible to both sintering and delamination. This has led to the consideration of more economically-applied APS TBCs that are dense with periodic vertical segmentation cracks. Such dense vertically cracked coatings (DVCs) have been successfully developed and implemented in gas turbine engines. These microstructures are produced in-situ through control of the process conditions with high deposition temperatures. However, the mechanism of such segmentation cracks is unclear. In this study, formation dynamics of segmentation cracks were observed through in-situ beam curvature monitoring during deposition in combination with microstructural evaluations. It was observed the initial layers of the coating are dense without segmentation cracking. As subsequent layers are deposited, periodic macrocracking initiates and typically propagates through the remaining coating thickness. The in-situ in-plane coating stress is significantly reduced after segmentation cracking begins. These results are reconciled through interpretation of thin-film fracture literature, and an initial framework to interpret the experimental observations is provided.