You might have learned about the close relation among ISO, shutter speed, and aperture from other shooting tips articles. Here, we will formally define what exactly the ISO is and how important it is.
To begin with, the word ISO (International Organization for Standardization) has been used many places and by many industries. In the world of photography, it refers to sensitivity to light. In the old day of film cameras, the ISO is the standard for camera film production. For example, we saw films were labeled ISO 100 to ISO 3200 where the lower number means that particular film has less sensitivity to light.
Nowadays, we barely use film camera, but the concept of ISO is still there. More specifically, the ISO in digital cameras still refers to light sensitivity. The only difference is that it changes from film sensitivity to the signal gain of a digital camera's sensor. With the same rule, the lower ISO means less sensitivity. So, by raising the ISO, you increase the shutter speed. (For more explanation, see ISO, Aperture, and Light Condition)
Someone might think that if high ISO give fast shutter speed, why we don’t always use the maximum ISO. Of course, there is one major trade-off; the higher ISO you use, the more noisy and grainy your image looks. So, raise the ISO only when you have to.
We normally use the high ISO under 2 conditions.
1. The low light situation
If you don't use a tripod, you may have to hold your camera for long time (like 1 second) under the low light situation. So, with just the minor movement of your hand, your image gets blurry. By raising the ISO, the time you need to hold a camera is reduced since a shutter speed is increased.
2. Shooting with ultra telephoto zoom
Like in the low light, your image could be blurred easily when you use the telephoto like 10x zoom. So, using the high ISO helps.
(pictures source: go_med @ rpst-digital.org)
See also
ISO, Aperture, and Light Condition part 1/2
ISO, Aperture, and Light Condition part 2/2
Learn about Shutter Speed and why it's so important
Aperture and F-number
More on Shooting Tips