Well, originally a .iso was supposed to be a disc image of an ISO 9660 disc. But clueless PC people started calling ALL disc images .iso, even if they are not ISO 9660 filesystems on them! (The generic ending for a disc image is .bin, but you don't see that often.)
Mac OS X can use disc images of ISO 9660 discs with no trouble. I've burned many of them, both with Toast and with Disk Copy/Disk Utility.
tooki