The actual cause of noise is the quality (or lack of quality) of the semiconductors used in the various parts of the camera.
Cameras are a combination of analog and digital circuitry The analog circuitry is the first thing the "image" passes through. All analog circuitry has a background noise level inherent to that particular circuitry. (Think of this as the background hiss in a radio, which is where the term "noise" comes from.) Better circuitry has less noise, which is the biggest single reason that less expensive cameras have more inherent noise than the more expensive ones.
ISO (usually pronounced as three letters: I-S-O) is effectively gain. When you increase gain, you increase the level of the inherent noise in the circuitry. This is why high ISOs have more noise than low ISOs.
Various things affect the amount of inherent noise in a circuit. Temperature is probably the most obvious. The higher the temperature, the greater the noise.
Light also affects noise. The greater the average light falling on a sensor, the greater the noise level of that sensor. It is fortunate, therefore, that bright areas tend to mask noise (just as a loud passage masks the background hiss of a radio). A sensor with a high average brightness, however, will show increased noise in its darker areas.
Just wanted to add a couple of things to this: in simple terms, when you push the power to the sensor, you increase the chance of a false reading by each of the sensor dots. These false readings are where a sensor records red, but actually that part of the image is black (for example). This is the noise.
I pronounce it as a word: eye-zoh.
In some pictures, fine noise appearing as speckles can enhance the picture. I use Noise Ninja, and it's awesome, but as I say, there are times where I think that the noise actually contributes to the art of the shot. But if it's appearing as blotches, get rid of it.
Finally, if I were looking at your posted picture (at its posted size), I probably wouldn't be moved to run it through Noise Ninja.
Great explination guys. I always wondered why myself...thank you to the OP for asking too!
Here is another question, if they get rid of the analog part of the equation, does noise go away or is it greatly reduced? There must be a reasont hey dont do this if that were that case, right? Any idea why they would have analog circuts still?

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thanks for the compliment
