How do you extract/install from an .iso file?

Without knowing exactly what operating system you're running, I recommend using either VirtualCloneDrive or Magic Disc. Both are free and work on just about any version of Windows (including 64-bit versions). Plus they don't have the crapware that Daemon Tools tries to shove down your throat.

7-Zip will open ISOs too (as well as being generally superb.)

Assuming Windows, you can try Daemon Tools.

In Linux you can mount an ISO similarly to the way you mount other volumes:

mount -o loop -t iso9660 file.iso /mnt/test

Alternatively, if the installer doesn't mandate a "physical" volume to install from you can also extract the contents of the ISO file (archivers such as WinRAR are usually able to do this, but there's also special software for this) and run the installer from there.