PlayStation 3 (PS3) ISO games are games that were ripped and copied onto a disc image, which is called an ISO. These ISO files are then burned to a DVD or Blu-ray disc. PlayStation games, movies, and PC games can be turned into ISO files with ripping software.
Many players create backups of their PS3 games by ripping the games to an ISO file. The PS3 cannot play these files as-is. They must be burned as a disc image to a Blu-ray or DVD disc. Even then, without a hack, the system will not recognize the disc.
Several hacked versions of the PS3 firmware allow ripped PS3 game discs to work. However, doing so is not recommended, since it will void the warranty and possibly render the console useless, as this goes against Sony's terms of service. The user can get banned from the Sony Network.