What is an isolated classloader in Java?
The author is using the term "isolation" basically to mean that the bootstrap classloader for the JVM (the "main" classloader) doesn't have any extra jars/classes in it (just one simple class which in turn sets up the child classloader(s)). The article isn't real obvious as to why this is "isolated" because it only sets up one child classloader. The "isolation" term becomes more obvious when you setup more than one child classloader. These children will be isolated from each other in that they won't share any classes (other than the core JRE classes). Thus, you can do things like have each child use a different version of the same jar.
From my understanding from the article that you linked to that an isolated class loader is a class loader that is separate to the main system class loader. That is, classes loaded by the isolated class loader won't be available to every class in JRE (only the ones that the isolated class loader loaded itself [and any classes loaded by any child class loaders]).
This could be useful because two of your dependencies might require different versions of the same library to run. That is, your dependencies might expect to see different instantiations of the same class in the library. Thus giving them two separate isolated class loaders will allow them to load the classes they require and not interfere with each other.
Here's how to create an isolated classloader, you'd create one any time you want an unpolluted system classpath, useful for bootstrapping Java programs.