I SO represents the sensitivity of the image sensor of camera to light. In film cameras this is the sensitivity of the film. However since digital cameras do not use films, they simulate this effect by boosting the light amplification with digital circuits. Higher ISOs means greater film (or sensor) sensitivity and thus the lower amount of light required to get the right exposure. Thus the ISO settings of your digital camera enables you to shoot in low light; without altering the aperture or shutter speed.
Understanding Digital ISO
Most of the regular cameras have a default ISO of 100 which can be boosted to 400. DSLRs take this to 3200 and beyond. Higher ISOs induce an artifact called noise in the image which is nothing more than a grainy effect. This tends to destroy the sharpness of the image but can be used creatively to induce a certain mood and feel into a scene. Normally, ISO 100 is good for all the photographs, boosting it to 400 compensates for the low ambient light and is suitable for late mornings and early evenings. ISO 800 or more can be used to shoot indoors. However given the way the shutter-speed, aperture and ISO interact together to get the optimal exposure, you can achieve the same exposure by a slower shutter-speed and/or a wider aperture. Most of the time you’ll want to set your camera to ISO 100 or auto-ISO and not worry about it (the camera will take care of the rest). As is the case with the photograph below, the camera was set on auto ISO, and the camera boosted the ISO to 1600 to properly expose the scene.
ISO And Grainy Effect
As for the grainy effect, some photographers deliberately boost up the ISO to produce classy, grainy and coarse results in the final output. High ISO not only helps in getting optimal exposure, it also creates the mood in the photograph (as in the photograph below).
High ISO enables photographer to shoot at fast shutter speed even in the dim and low light; but with lots of grain and noise which can of course be reduced to some extent during the post-processing. But if you are only planning to induce the grainy effect, it’s best to do it during post-processing. This will help you get a clean image and allow you finer control over the levels, quality and feel of the effect.