In what conditions we use Higher ISO setting in the camera? Or How the ISO speeds related with different shooting conditions?

Higher ISO settings are chosen by your camera in low light situations when on automatic. This can be problematic though as higher ISOs usually mean more noise in the image. In the good ole days of film, higher ISO (or ASA as it was called) meant a shot was "granier" as faster film speeds meant larger grains to soak up the light.

Now, in the digital world it's because faster ISO speeds mean that less light is available on the CCD to be soaked up because of shutter time. Higher ISO makes the CCD work harder and faster to grab the light, but that also means that noise creeps in.

This is also true because of of the obsession of more megapixels in camera design. And I have to tell you, usually, more MP isn't better MP because of noise. CCD chips on point and shoot cameras a smaller and as such, fitting in more pixels causes them to lose light sensivity. Sure, there’s more data on the chip, but the chip can’t absorb the light data and what it ends up with is a picture that has more noise than image quality.

So, the higher the ISO, and low light usually means a noisy picture and a disappointed photographer.

More information on ISO can be found here.