and ISO rating represents how sensitive the film is to light. for digital, i guess u could interpret it as how sensitive the sensor is to light.
the higher the rating, the higher then sensitivity. sensitivity refers to how much light the film/sensor "records" the more sensitive (higher rating) the more light it records, cetaris perabus (spelt correctly?)
so as an example, if everything else is the same (aperture, shutter, shooting conditions) and u shot one photo at ISO200 and another at ISO400, the one with ISO 400 will be brighter. in terms of how much brighter, it is referred to "1 stop" brighter. iso values start from 50 and goes up this way:
50, 100, 200, 400, 800, 1600, 3200, 6400....
there are some films rated at iso 160 etc etc... but those figures i gave u are all "1 stop" apart.
technically, on digital u could get any ISO u want. as in no need to stick to the stops. but manufacturers just limit it to the usual 50 - 3200. dun think i've seen any digital cams that can go beyond that.
the flip side of having a sensitive rating for film or ur sensor (we call highly sensitive ISOs "fast film") is that u get heaps of grain.
now, that's all theory, the practical part of it (i assume that u are shooting digital) is that a digital camera can switch ISOs between shots, not like film where the film is loaded, it has to be finished b4 u can load another roll of ur desired ISO.
generally at nite u use higher ISO, day u use lower. but there are many many exceptions. rules are always broken in photography.