ISO Speed

ISO is the sensitivity of the sensor to light. If you double the ISO, u need half the amount of light to expose correctly. Higher ISO also implies more noise(those random color specks you sometimes see in a photo).

Upto a certain amount, noise can be dealt with using noise reduction software light neat image, noise ninja, etc. When noise is too much, using noise reduction software decreases d noise, but takes away a lot of detail too.

Higher ISOs also decrease the color quality and dynamic range to some extent. I dont know what more to say about ISO actually, I dont think you dont need to know anything more about it...

UPDATE: I just thought of an interesting analogy for ISO...

Assume:

Merc ~ ISO 200

Honda~ ISO 400

Fuel~ Light

Destination~ Exposure

Ok, here it goes: A Honda(ISO 400) will consume half as much fuel(light) as the Merc(ISO200) to reach the same Destination(Exposure). However, the Merc will give you a better ride(less noise/better picture quality)

ISO 200:

ISO 1600

these are 100% crops(click on each image to see it). Notice that the ISO 1600 shot has a lot more noise compared to the ISO 200 one(negligible noise). The ISO 1600 shot is still usable because these were taken using a DSLR... on point and shoot cameras noise becomes really nasty from ISO800 onwards.