An ISO is a standard for CD Images (iso 9660) and some hosts offer customised media to install your Xen HVM and KVM machines from.
The reasons for this could be customised packages, ssh keys or configurations that are common.
Many vps providers have SolusVM or something similar that can mount the custom ISO and boot the VM to it for installs of custom os's. We have used this to install PBX's and other types of non standard hosting server platforms.
ISO image is an archive file of an optical disc and it is saved with .iso extension. If we are installing OS through IPMI console, you can download Linux and windows ISO's from official site and use to install server. ISO can create by ISO converters.
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