In it's simplest form, ISO refers to a number which represents how sensitive your camera's sensor is to light. The lower the number, the less sensitive it is and consequently the darker the image will be. The greater the number, the more sensitive the camera is and the brighter the image will be. This comes at the cost of noise, however.
Noise is that annoying static looking stuff that appears on your photos. It can be removed with software light Lightroom or Photoshop, but ideally you should be trying to control your ISO settings so that you don't have to.
Shouldn't I just leave my ISO as low as possible all the time?
No, of course not. There will be circumstances when you will need to bump up your ISO, knowing full well it will cost noise in your image. The goal is to try and put together an aperture and shutter speed appropriate enough so that you don't need to raise your ISO too high.
When Should I use a low ISO vs a high ISO?
There are some general guidelines to changing your ISO settings, depending on your lighting conditions.
If it's sunny, try to keep you ISO as low as your camera allows. Usually this is 100
If it's cloudy or partly cloudy, try using an ISO setting of around 200
If it's completely cloudy or stormy, try using an ISO setting of around 400
If you are shooting in low light, like indoors of a house, try using an ISO setting of around 800
You get the idea....
Hopefully that should give you an idea of how you step up the ISO settings progressively as it gets darker. Keep in mind that the higher the ISO, the greater the noise. A good way to think of what ISO controls is to think of ISO controlling the fill light in the image.
FIll light would be the light that falls into the shadows, but doesn't go completely dark. If your image is coming out with really dark shadows and really bright highlights, try raising your ISO.