Does ISO stand for something? Maybe, but no-one really cares. In photography ISO means the sensitivity of the camera's sensor to absorb light. It goes back to film days, when you would buy a roll of film that was, say, ISO 400. Unlike film, on our digital cameras we can change the ISO with the press of a button.
Typical ISO numbers you will see on you camera are 100, 200, 400, 800, 1600, 3200, and so on. The lower the number, the less sensitive to light. As a broad guideline, ISO 100 and ISO 200 are going to be used outdoors in bright sunlight. At ISO 1600 the sensor is capable of absorbing light in dim indoors conditions.
Don't get too absorbed on the series of numbers I've quoted above. Many cameras will show other in-between numbers like 160, 320, 1250. On almost all cameras, the smallest number is likely to be 100. On newer cameras the biggest number is big. (A recently announced camera claims to go up to ISO 3.2 million!) Bigger ISO numbers mean the camera can "see" more in the dark.
Check what the maximum ISO is on your camera. As a general rule of thumb, stay below about two numbers below that. My camera is capable of ISO 6400. I try stay at 1600 and below, most of the time.
But why? If the facility is there, surely we should use it?
As in life in general, there is always a trade off. For ISO, the higher we go, the noisier and blotchier and less defined our photos become. Remember old-days televisions when they went out of tune, and there would be a grey blotchy mess on the screen. That's like noise in the extreme. Now imagine that very lightly applied to your beautiful photo, taking away some of the clarity.
That doesn't mean that everything has to be shot at ISO 100, where noise is mostly non-existent. A bit of noise, at say ISO 800, is completely acceptable, and we can usually clean up a moderate amount of noise in software afterwards. Newer cameras are becoming much better at controlling noise at higher ISOs. The ISO numbers are relative, especially if you have the latest and greatest, most expensive camera. You may find that shooting at ISO 409,600 is acceptable to you, in some circumstances.
Take two photos of your favourite subject (fluffy toy?) at different ISO settings.
Set your camera to P mode.
Set your ISO to the smallest number (ISO 100?)
Take note of the Aperture and Speed values as you line up your shot.
Now set your ISO to the max.
Again, take note of the Aperture and Speed values while you take your shot.
Compare the two photos.