Modern compacts and DSLRs have mastered the usage of photo detectors in place of the good old photographic film. The layers of the sensors are frequency resistant specific. Each layer conducts only at the specific frequency of the primary color that it is meant for.

These sensors unfortunately conduct in the presence of white noise that is uniformly present across all the frequencies. This noise interferes with the information of the image. The efficiency of photo detectors has been greatly enhanced by the use of micro lenses but a test of the efficiency of the photo detector is its ISO sensitivity.

The base of this ISO actually determines the threshold laid down to eliminate the noise present. If the threshold is too high or the ISO base is too low, that is the point at which the photo detector starts to conduct then there is a danger of signal suppression along with noise which will result in loss of detail. If the ISO base is increased there by decreasing the threshold level then the photo detectors conduct even when noise is incident on them and this noise gets amplified by the circuitry which in turn will affect the picture quality.
The method usually followed for noise reduction is to amplify the noise and feed it in opposite phase to the circuit which determines the thresh hold level.
An ideal balance has to be found between acceptable noise level and minimum amount of photons that have to be incident on the sensor at which level the sensor will have to conduct.

So a base is set for the ISO which defines the optimum sensitivity range. Higher ISO from 3200 onwards are but a mere amplification multiples of the ISO 3200 sensitivity.