ISO For beginners
What is ISO?
Short Answer
The ISO Standard
The term "ISO" refers to the International Organization for Standardization and their publication 12232. This publication describes speed ratings for digital cameras. Very roughly speaking, this covers how the camera maps photons hitting the sensor to how dark or light the resulting image looks.
How The Standard Applies to Digital Photography
Roughly speaking, the ISO setting on your camera serves three purposes:
It provides a context for interpreting the raw data from the sensor
It sets a target exposure for the camera's metering system
It may cause the camera to optimize itself for that target exposure.
Long Answer
In addition to the ISO standard, which describes how to apply ISO to processing the captured data, ISO is also used by the metering system, and sometimes to adjust internal camera configurations.
Providing a Context
Roughly speaking, ISO gives us a context for determining how much light needs to hit the sensor in order for something to be considered light or dark.
It turns out that light is not continuous. Light is made of "photons". You can think of these as little raindrops of light.
A typical digital camera sensor consists of a rectangular grid of "pixels". Modern sensors typically have tens of millions of pixels. Very roughly speaking, each pixel counts how many photons reach the sensor while the shutter is open. The ISO standard yields various ratings ("speeds") for mapping the photon count per unit area to image lightness in the resulting JPEG.
For instance, at a low ISO. a pixel seeing 10,000 photons might be mapped to a dark spot in the resulting JPEG. At a high ISO, those same 10,000 photons might produce a bright spot.
Note that ISO does not alter what would traditionally be called "sensitivity". If the pixel saw no photons at a low ISO, it won't see any at a high ISO. Similarly, if the pixel saw 10,000 photons at a low ISO, it will also see 10,000 photons at a high ISO.
Nor, does ISO alter what is traditionally called "gain". Gain usually refers to mapping a quantity of something to a different quantity of the same thing. ISO does not map the image lightness on the sensor to image lightness in the JPEG. For instance 1/100 at f/2 is four times brighter on the sensor than 1/25 at f/4. Yet both yield the same photon counts, and both will result in the same image lightness in the JPEG.
ISO maps photon counts to image lightness. Think of ISO as being like the context for grading a creative writing assignment. The same paper might get an "A" in a high school writing class, but a "C" in a college writing class. Same input, just a different context for mapping the inputs to the output.
Setting a Target Exposure
Modern digital cameras have metering systems. When you select a particular ISO, the camera's metering system will strive for the exposure that corresponds to that ISO.
If you are relying on the camera's metering system (perhaps you are in one of the camera's "Auto" modes), the camera will attempt to hit that exposure by varying aperture and/or shutter speed.
Optimizing Camera Performance
Cameras generally expect the exposure will be in the ballpark of the target exposure associated with the selected ISO. If you set the camera to ISO 100, it will expect an exposure higher than if you set it to ISO 6400. Some cameras will optimize themselves for the expected exposure. Set the ISO to 6400, and the camera may add a little less noise to the image, but that camera won't be able to tolerate a high exposure like you would normally associate with ISO 100.
Disclaimer
The above is a very broad overview in rough terms. It glosses over a lot of technical details, hitting on the important concepts.