Exposure in Photography is determined by the Shutter Speed, the aperture of the lens, the sensitivity of the ISO and the lighting of the scene.
In this post I'm going to talk about ISO.
In very basic terms, ISO is the level of sensitivity of your camera to available light. The lower the ISO number, the less sensitive it is to the light, while a higher ISO number increases the sensitivity of your camera. The lower the number the lower the sensitivity of the film and the finer the grain in the shots you’re taking.
The component within your camera that can change sensitivity is called “image sensor” or simply “sensor”. It is the most important (and most expensive) part of a camera.
Traditionally in film ISO refers to the sensitivity of the film but with digital photography it refers to the sensitivity of the sensor.
Film
Sensor
Take a look at the image below a higher ISO gives a grainier image and a lower ISO gives clear image.
Higher ISO settings are generally used in darker situations to get faster shutter speeds. For example an indoor sports event when you want to freeze the action in lower light.