An ISO image (.iso) is a disk image of an ISO 9660 filesystem. More loosely, it refers to any optical disc image.
Most CD/DVD authoring utilities can deal with ISO images: Producing them either by copying the data from existing media or generating new ones from existing files, or using them to create a copy on physical media. Most operating systems (including Mac OS, Mac OS X, BSD, Linux, and Windows with Microsoft Virtual CD-ROM panel) allow these images to be mounted as if they were physical discs, making them somewhat useful as a universal archive format.
One can just use an emulator to run the image or copy the image with the appropriate software to another cd or dvd.