From MEPIS Documentation Wiki
An ISO image is an archive file (also known as a disc image) of an optical disc in a format defined by the International Organization for Standardization (ISO). This format is supported by many software vendors. ISO image files typically have a file extension of .iso. The name ISO is taken from the ISO 9660 file system used with CD-ROM media.
Refering to "ISO" can however lead to funny confusions when speaking with people specializing in other fields as the ISO standards cover many things and people pick different prominent ones and call them "ISO". In computing, ISO can also refer to character encodings like ISO-8859-2 (today you most likely want to use utf-8 instead of these).