ISO or International Standards Organisation is basically the sensitivity of light of your sensor which results the exposure of your image. The ISO is measured in numbers typically starts with 100 and continues to be double till the time it reaches the maximum capacity of your camera. 100, 200, 400, 800, 1600, 3200, 6400 etc. By default it increases in 1/3rd incremental which can be reprogrammed in 1/2 or one full stop incremental. The number chosen depends on the amount of light available for the exposure. More light means low ISO. Similarly Less light means high ISO.
Apart from simply changing the exposure, ISO affects the quality of image. Higher ISO normally produce noisy or grainy image. It also affects the color contrast. Lower ISO not only makes less noise, it also produces better color and higher dynamic range. Therefore it is generally recommended to keep ISO as low as possible to get best quality image.
Generally high ISO images also looks fantastic on the camera LDC screen, which does not necessarily means that it won’t look noisy on the computer screen or in the print out. However there are situation when we have to increase the ISO particularly in the low light situation. The low light ISO performance of a camera is improving day by day. Modern days camera are capable of handling high ISO noise better than before.