ISO generally refers to a measurement of light sensitivity. ISO is the most widely used measurement of light sensitivity, though there are other systems such as ASA.
The term “ISO” actually refers to the organization that developed the rating, the International Organization for Standardization (the french name being shortened to ISO). In English, the term ISO has been coopted to refer to the organization’s light sensitivity rating.
In photography, ISO is the speed at which an image becomes exposed. Lower ISO numbers indicate longer, and higher numbers indicate shorter time to reach full exposure.
Faster ISO speeds, while taking less time to expose, adds noise to your image. A photo taken at a higher ISO will have more color aberrations between pixels.
When shooting in manual mode, a low ISO setting will produce a sharper image, but will require more light to hit the sensor. This requires setting the lens to a higher aperture, a faster shutter speed, or both. Shooting in higher ISO settings will require less light, but will lose detail and sharpness.
Digital cameras often advertise extremely high ISO ratings, but often produce images that are extremely noisy.
In the days of film, ISO was usually called “Film Speed”, or the speed at which a frame of film could become fully exposed. In film photography, the ISO is determined by the film itself, and one could buy different speed films for varying needs. The most common films were of ISOs between 100 and 400.
Digital cameras usually come with an Auto ISO setting that will approximate the necessary ISO setting based on scene light and camera settings. This setting can often be set to have a minimum and maximum ISO that can be used.