ISO sensitivity
ISO is the sensitivity of film to light in accordance with the definition of the International Organisation for Standardisation (ISO). Higher ISO means that the camera sensor has greater sensitivity to light. In short selecting a higher ISO allows you to take better pictures in low light condition - without flash.

But everything has its price.

Noise, grain and artifacts. Here: http://www.dslrphoto.com/dslr/space.php?uid=2&do=news&id=9236 for example we can compare 1600 ISO vs 3200 ISO, we can see the amount of grain and noise increased in 3200 ISO. It is caused by the sensor of digital camera when it tries to catch as many details as possible in low light conditions, that's why the newer the camera (the newer the digital sensor) the amount of noise and grain is smaller in respective ISO settings.

So why do we need high ISO? It is useful usually in In low light conditions - we can set shutter to speed that we will not move camera, and the image will get brighter while increasing ISO setting.

The conclusion would be - that we should keep ISO as low as possible. If there is a need then increase it while taking photos in dark rooms, gloomy days, or at night. I would recommend quite nice article here: http://www.aguntherphotography.com/tutorials/the-correct-exposure-part-1-shutter-aperture-iso.html

Cheers!