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Apart from being one of the leading standards organizations, ISO refers also to a CD or DVD image (not picture..) file with an extension of ".iso". The extension comes from the full name of the CD-ROM and DVD-ROM file system specification, ISO 9660.
Just like other CD/DVD image formats, ISO is a file that contains full content of the disc, including every single track, directory, file and information about the structure of the disc (i.e. ISO files can't be used as they are, but they need to be either "mounted" with tools like Daemon Tools or burned to CD or DVD in order to see what files the disc image actually contains). Normally ISO files are being used to replicate existing CD/DVD discs, transfer those discs over the network to other location (or to other person) and burn back to CD/DVD which then would be an identical replica of the original disc.