An ISO is the disc image. It contains all of the files to be written on the CD.
A cuesheet is just simple text file named *.cue that describes the tracks and format of usually a .BIN but maybe also ISO. The cuesheet tells how many tracks and where they are located of the image. For example, in CDRWin, you load the *.cue file (cuesheet) and it tells the program the location of the *.iso, *.bin, whatever, and the track details. So a cuesheet basically is like a Table of Contents for a disc image!