Perfect Defence

I. Advantages & Downsides

Pros:

It is very powerful in defence (RA for example will lose on a 1:1 ratio to your Infantry, but Infantry only costs 40 and Tanks more than 100; same with Bombers)
Even though it has been nerfed, it's still mobile. With (cheap) Air-transports you can move around and keep pressure on the enemy.
There are no real money issues. Therefore, it's always possible to reinforce and most times it's even possible to reinforce in all your cities within the first 2 turns of each week. That makes you army bigger than the enemy's one, who cannot afford that much units.
A PD player is never defeated; unless he's really lost. Even when it looks really bad, if a PD player has countries, he can always fight back and defend well. (1)

Cons:

Large stacks are required to make a real impact. Therefore, it cannot attack on more fronts at the same time.
You need to take your time to build up your defence well (defence lines) and you need to move a lot of units. Therefore, 2 minutes may be not enough in a CW or any other normal game when you have a vast territory.
It is weak against GW, because a GW player can attack at several places at the same time and can destroy many walls in 1 turn, so you don't know in what city the next attack will be. GW can also play on multiple fronts, PD can't. GW is able to create a total chaos; something that is disastrous for a PD player.
Also against IF the job won't be easy. IF can hold a sustained pressure and capture territory at the same time. It then becomes very difficult for PD to expand, because it has to pay too much attention on defence. (1)

II. Units: boosts and nerfs

+1 Defence Infantry and Militia

+2 Critical Militia
+1 Range Militia
-1 Range Infantry
-10 Cost of Infantry and Militia
Defence Bonus for Militia: +1 in own city and +1 in defence lines
Defence Bonus for Infantry: +1 in own city, +1 in defence lines and +1 against Tanks
Main Attack Units: -1 Attack, -2 Critical and -1 Range (-2 for Bombers)

III. Upgrades

General: Defence (3/4)
General: Ground Secondary Defence (4)
General: Ground Secondary Attack (4)
General: Movement Range (3/4)
Faster General 1 & 2 (3/4)
Faster Ground Main Defence (3/4)
Expendable Ground Main Defence (3/4)
Lucky Ground Main Defence (3)
Ground Secondary Defence (4)
Naval Transport Capacity (3/4)
Air Transport Capacity 1 & 2 (3/4)
Cheaper Transport (3)
Safer Transport (3)

See a prioritization of upgrades here: Strat & Upgrades

IV. Environment: where & when to use

10k countries for Perfect Defence:

Turkey
France
Ukraine
South Korea
China North
Germany
UK
China Southeast

5k countries for Perfect Defence:

Austria
Greece
Serbia
Poland
Ukraine
Belarus (4)

The choice will be different in all situation, depending on map and funds:

When playing 1v1 Europe 5k: Greece and Ukraine are the best options. You can expand in the first turn to: Turkey, Italy or Romania and Bulgaria (from Greece).
When playing 1v1 Europe 10k: Turkey and Ukraine are the best options.
When playing in a team-game, you should start somewhere East, or (if 10k) take Germany or Spain to hold the opponent.
East Europe is better than West Europe in Europe maps, because you have close cities to expand to. Starting in Spain should be an option, but the enemy can hold you off there with bombers and blocking while expanding himself in the East (in case of a 1v1). Usually, a good reason to start in the West is the income. But, since PD doesn't really need much income because of its cheap units, it's better to start in the East. Also, the +100 cities function gives PD an advantage, since you have more starting units witch you can directly use at their full strength.
If Eurasia 10K normal game: I usually take South-Korea (and expand to Japan and China), Pakistan (and expand to India ans Iran) or somewhere in Europe (Turkey or UK for example).
If you have great parts in Asia with PD, that makes you almost unbeatable, because you can use your auto-buy function and spam your opponent with a huge unstoppable load of infantry that keeps on coming and coming. (1)

V. General rules

Play defensively - like the name says - and keep spamming infantry. Don't build any other units except infantry, it's a waste of money if you buy other units (only transports or maybe 1 bomber for turnblock). You need to play the defensive way, never lose a capital city you take. Keep expanding when possible, and build a defence line around every capital city you take. When a defence line is destroyed by the enemy; move all your nearby troops in the city, so the enemy will lose there. Also restore the wall at the same time, so you can do a counter attack the next turn. PD has always units for attack; try to use them 1 week before the reinforcements, so it's very hard for the opponent to take it back. (1)

90% of your army should be infantry, 9.99% should be logistic units like air transport and sea transport. 0.01% other. This mean I should not see a tank army if you are pd. That 0.01% is your small force used to break walls. (3)

VI. Tactics

Some key points:

Pick your country.
Expand and wall all of your capitals.
Auto-produce Infantry for 2 reinforcement weeks. This will give you a chance to collect money.
After that you can start to make submarines and marines. Then play like MoS. (5)

I prefer to start with a country that has at least 1 port city. Why? Because having 1 port city allows you to expand twice as fast for half the cost. If you choose to pick a land lock area, you will eventually need to buy an air transport to keep up with expansion of your enemy. Learn how to use 1 transport to move 6-10 units instead of buying 2 air transports.
There are 8 infantry units in neutral France, you will need 16 infantry to take it. As a general rule of thumb, you will need double the infantry to capture an infantry defended city. If they are militia, you will need the total plus 1 more infantry. If you see an enemy army, and you can't crush it, either prepare to defend, or move on. Don't suicide your weak attacking infantry.
Wall every capital you have, wall every city that has 3+ reinforcement.
When playing pd, you must understand the basic tenant that you are weak; therefore, you need to slow down your opponents by creating walls. Wall a city before you take it, wall the entire middle east, walls everywhere. You have lots of infantry you can spare, now use them for your walls.
Now that you have a strong outer shell, move all your units quickly from the heart to the front lines using various air transport and sea transport. You should be able to move great distance by building a train system. Do not worry about how fast your enemy is expanding, just make sure your unit count matches his or is greater. (Unless you are pro, in which case don't let his unit count become 2x greater than yours.)
There are some people who like to say this beats that, or SM is superior, but I am here to tell you that there is no such thing. This isn't rock-paper-scissor. If you have a better mind, you will win. With that being said, the way to generally beat GW is by walling everything. Then, make sure you use your air transport to out-expand him while slowing him down with massive and elaborated walls. Create elaborated double walls. SM will have less units then you, but make sure you can move your units as quickly as he can. Against another PD user, you must first wall the city, then attack it. When you are playing against a GC user, make sure you are smart enough to crush his tank/combo stacks by defending, and you will win.
When you are about to capture a city, make sure you wall it also, so you can use your troops immediately. This tactic applies to all strategies. Don't be lazy, wall everything. (3)

In world games, once fully expanded (full continent etc.) there's nothing wrong with making tanks, bombers, or even marines in subs to invade unexpectedly. What I usually do is start by setting up my defense walls, and spamming infantry in cities to destroy all enemies who wish to attempt invading. Once I'm set up, I make subs and marines to invade a continent, along with a large stack of infantry in naval transports (with destroyers/bombers to defend.) I take as many cities as I can 1 week before reinforcements with my marines, and the next week I replenish my new cities with the large amount of inf I brought along. (4)

VII. Tips

Never attack enemies cities in the reinforcement week, instead, reinforce your frontiers and wait it to be attacked;
Expand neutrals as much as you can, since it's easier to you to capture and defend it than wait for your enemy to try an attack;
Avoid using tanks and destroyers, instead keep spamming infantries and some bombers to support you with breaking walls and transports to expand faster;
If you have a big stack, always try to protect it with walls, since you can easily be turnblocked if you don't;
If your enemy is playing an offensive strategy sometimes it's better to "leave" your cities unprotected and let them attack it, so your defense will do the work. (2)

Basic Tips:

Use mainly infantry for defending and attacking.
Tanks can be useful for expansion, but buy infantry if it's more cost-effective.
With PD's buff on defence it is better to let your enemy attack you rather than attacking him.
With PD it is better to defend than attack because of PD's poor offensive abilities.
Avoid attacking enemy cities on reinforcement week.
Wall important cities with militia such as capitals and major cities. (4)

Advanced Tips:

Estimate where your enemy will attack and reinforce your frontiers with infantry and militia.
Once you've defended an enemy attack successfully, your enemy will lose a lot of units and you can easily capture his weakened cities and still maintain top defence and control.
Therefore, you should defend enemy attacks, also while maintaining a good income and expanding to neutrals countries. Once you've defended, attack the enemy the week before reinforcements.
When defending, take a look at what's needed defensively, sometimes its better to buy militia for your defence rather than infantry.
Keep the pressure on your enemy by continuously spamming defence in your main frontiers, while you keep sending more soldiers from your back cities up to the main frontiers. (4)

VIII. Country-strategy openings

See some expansions here: Expansions

Sources:
(1) Hugosch
(2) Pinheiro
(3) Cthulhu
(4) TopHat
(5) Tesla