the iso setting on a digital camera is designed to replicate the different speed 35mm fillms you could/can buy.
the higher the iso number the more sensitive to light the film, or digital camera sensor is. therefore at a high iso you can shoot without having to use the flash because the sensor is more sensitive to light, however this does have the drawback of introducing more and more noise into your photo the higher the iso setting.
the fuji s6500 is pretty good at dealing with this noise, but even at an iso of 3200 (and to a certain extent 1600) it struggles. a lot of cameras struggle at 800 iso, but the fuji seems to cope with it quite well.
there are several fuji s6500 owners around these forums so hopefully they'll confirm that i'm not talking a load of rubbish!