ISO image of Operating Systems

"What do we mean by ISO image of a Operating system?

(If we're only concerned with their uses for operating systems,) an ISO image is a binary file representing the entire filesystem of one of the following:

Install CD: These are not capable of running an OS, only installing it.
Live CD: You can run an OS from these, or install the OS (generally)

How do we make a ISO of any OS?

It depends on the OS.
I don't know of any way to make either kind of image for Windows from an installed system (there is a way to make a live CD if you have the install CD).
For Linux there are lots of ways to make a live CD from an installed system.

When do we use ISO image of OS?

When you want to download an install CD or a live CD from the internet and burn it to a CD yourself.
When you want to distribute your own custom CD over the internet

So short answer: Downloading an ISO is the digital way of picking up a CD."

When you would like to copy your OS disk into another disk / HDD you can create an .iso format image.You can run it by using virtual cd tools like Daemon Tools / Power ISO or write your ISO file to an other cd/dvd to use it later.