For each Windows OS, there are three types of ISOs you can download from MSDN or VLSC: the base install ISO containing the original (RTM) version of the OS; the service pack ISO containing only the service pack, which must be installed on a running system; and finally the latest ISO containing the OS already updated with the latest service pack (and/or additional updates).
The service pack ISO can only be used to update a running system; but if you download the latest ISO (usually described as such, otherwise you can just look at the release date) you can use it to install the most recent release of the OS.
For example, for Windows 7 you have:
- Windows 7 (original RTM release)
- Windows 7 Service Pack 1 (only the service pack)
- Windows 7 with Service Pack 1 (updated release already including the service pack)
For Windows 8.1, which doesn't have any service pack (yet), there still is an updated ISO which already contains several updates, including the major ones.