ISO, or International Standards Organization, affects the amount of light that hits the image sensor in the camera. In the film days, ISO used to be a measure of the film speed. Every time you double your ISO rating the amount of light your camera needs to produce an image is cut in half.
As the experts over at Techquickie point out, ISO can be very useful when you need to use a high shutter speed for something like sports photography. A high shutter speed will limit the amount of light that your image sensor can absorb, but turning up the ISO setting will compensate for that and result in sharp photos.