What ISO sensitivity denotes is how sensitive the image sensor is to the amount of light present. The higher the ISO, the more sensitive the image sensor and therefore the possibility to take pictures in low-light situations.
ISO speed affects the shutter speed/aperture combinations you can use to obtain correct exposure. If you look through your camera and the bracketed meter shows that you do not have enough light for capturing the image, how will you get enough light to come through the camera without using flash? This is when you can increase your ISO (which makes your sensor more sensitive to light). You can increase the ISO as needed in order to correctly capture your image. When you are trying to capture a image in a low light situation [but have opened your aperture the widest it can be and have the shutter speed the lowest so the image won’t be blurred (anything under 1/60 of a second without a tripod will be blurred), you will need to increase your ISO. Once you increase your ISO, you may increase the shutter speed.
ISO Speed & Noise
However, there is a price to pay with your image appearing more noisy (in film terms, it was grainy). The increased sensitivity allows the image sensor to record more light signal and more noise. The ratio of light signal to noise (S/N ratio) determines the “noise” in your resultant image. An image sensor is usually calibrated so that it gives the best image quality (greatest S/N ratio) at its lowest possible ISO speed. For most consumer digital cameras, this value will be expressed as ISO 50, ISO 64 or ISO 100. A few digital cameras use ISO 200 as their lowest ISO speed.
ISO Speed & Image Sensor Size
The size of the image sensor determines the ISO speed range that a digital camera can use without suffering from undue noise. One reason for this is because the pixels on the larger image sensor can be larger and therefore receive more light, and thus have a greater signal-to-noise (S/N) ratio. If we take two image sensors, each with 4 megapixels resolution, but of different sizes, the 4 megapixels image sensor that is smaller will exhibit more noise at higher ISOs than the larger one.