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>
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