An ISO file can be made from many different things. Usually you'll find ISO files as complete copies of a cd or dvd disk. But you can compile your own ISO file from other sources.
ImgBurn can make an ISO file from various files on your hard drive, or a disk in your drive. Use it in Build mode to make an ISO. ImgBurn cannot make an ISO of an encrypted disk though, so for commercial dvd movies, you need to break encryption first.
Read this entry at widipedia: http://en.wikipedia.org/wiki/ISO_image
By the way, ImgBurn is a fine burning program also, and is free to download and use. www.imgburn.com