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Auto ISO is an incredibly useful setting, especially in Aperture Priority (A) and Programme (P) modes. By selecting Auto ISO you let your camera choose to raise the ISO instead of decreasing the shutter speed to achieve a correct exposure.
For example, in Aperture Priority mode you may select a small aperture that requires a slow shutter speed to achieve a good exposure if you have also manually selected a low ISO. However, if you have selected Auto ISO, the camera will automatically raise the ISO instead of lowering the shutter speed, and will prevent you from taking a photo that shows camera shake.