You're confusing file formats. .ISO is an image file of a disc. .AVI is a container file for video play back.
An .ISO is designed for easy transport / handling of cd/dvd images in a single file.
An .ISO can hold anything, you can't convert it to .AVI but the .ISO may hold .avi files.
ISO options are
1) Burn the ISO to the intended media.
2) Mount the ISO in a virtual drive and extract / use contents
3) Open the ISO in a program like winrar and extract the contents.
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