ISO and Digital Noise

The ISO rating refers to the sensitivity of
the media used to capture the photos.

In film-based cameras
The ISO rating refers to the film's sensitivity. Lower ratings like ISO100 mean that the film is less sensitive (needing more light), but able to produce photos that contain less grain and more saturated colors.

In digital cameras
The ISO rating refers to the camera CCD sensitivity, since digital cameras don't use film. Most use CCDs to capture photos. Lower ratings like ISO100 mean that the CCD is less sensitive (needing more light), but able to produce photos that contain less digital noise and more saturated colors. In most digital cameras, ISO100 is the setting which enables it to produce its best images, because the CCD doesn't need to boost its sensitivity (which results in noise).

But...
Camera needs a lot of light.
Works best outdoors or
with a light source, such as flash.