If you are an older photographer, you might remember purchasing film with an ASA rating.  ASA stood for the American Standards Association and relates to the light "sensitivity" of the film.  A high ASA film could be used in lower light levels.  And low ASA films were used to make the sharpest images with plenty of light.  The now discontinued Kodachrome 25 was a good example.
 
Around 30 years ago, the Internationale Organisation of Standards, based in the French speaking area of Switzerland (Geneva) adopted the ASA standard for all the world's film ratings.  There were other rating systems before that, with DIN (Deutsche Industrie Normal) being the most common found on German made cameras and films.  You will still find DIN numbers on older German cameras and exposure (or light) meters.  But, most have an ASA setting as well.
 
The way ASA (and ISO) works with film is it finds the middle of its exposure latitude.  The meter set to that ISO would tell you what settings would give you a good exposure for the sensitivity of that film in different levels of light.
 
With the development of digital SLR's (or DSLR's) the same ISO ratings have been adopted, so that pros could use their expensive light meters and not need to learn a new ratings system.  The difference is a CCD or CMOS chip doesn't have the same exposure "curve" that film has.  Instead of tapering off at both ends, it ends abruptly.  The term we use for exposed areas outside of the limit of the sensor chip is called "clipping". When the exposed area is very bright or very dim, it contains zero detail.  The areas between pure black and white have red, green and blue numbers between 0 and 255.  Zero is no color (black) and 255 is maximum color.  If all three color "channels" reach 255 then the color seen is pure white.  It lacks any detail and is often called a "blowout".  There is no way to recover these areas in post, other than to paint in the color that belongs there.
 
For that reason, the ISO rating on DSLR's is shifted slightly to the underexposure side, usually by about half a stop.  This protects you from getting blowouts in normal lighting.
 
Each make of camera have their own "system" for calculating the ISO rating, but needless to say, they want you to get good exposures, so you can expect the rating to be useful and accurate.
 
Like film, the general rule is to set a low ISO rating for bright light and a higher ISO for dim light.  This gives you more choices with your exposure settings.
 
Note: there are only TWO exposure settings -- f/stop and shutter speed.  They are based on the amount of light and the ISO chosen.  ISO is NOT an exposure control.  If you find your settings reaching the maximum shutter speed limit or below the maximum aperture, you need to adjust the ISO setting and start over.
 
Also note that while the French refer to ISO as the Internationale Organisation of Standards, we often switch the words around to fit the ISO abbreviation.  The English speaking world calls it the International Standards Organization.  ISO is a Greek word for "equality".
 
Matthew L Kees
Director of MLKstudios.com Online Photography School
All photos © Matthew L Kees, MLK Studios

In the first photo:

Broadmoor Hotel, Colorado Springs 100 ISO Chrome Film (w/tripod)

The second photo:

Hollyweird, CA 400 ISO Print Film (w/flash)