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ISO images may be mounted in the file system similar to a physical cd or dvd. This is done in the same way as you mount any other device, mount only needs a few directions:

mount -o loop -t iso9660 <source iso> <target dir>

for example:

mount -o loop -t iso9660 ubuntu.iso /media/myiso

If you are frequently using ISOs it may be more convenient to apply a Nautilus script for the task, see http://doc.gwos.org/index.php/Mount_ISO_script

You can apply this to dist-upgrading from an image file without burning a CD. When you do apt-cdrom or synaptic or how ever you want to add the CD, run

sudo mount -o loop /path/to/cd/image.iso /cdrom

when it asks for you to insert the CD. The package utilities like to unmount /cdrom when they see there is no physical disk in the CDROM drive, so you have to run the command only after it fails to find a physical CD.

See also: specification for ImageMounting