Interesting, both you and Ray are saying that higher ISOs are less noisy - specifically in John's post - less read noise. But do they not also produce more "shot" noise? Is it not normally the case that we see more noise in images shot at high ISO?
What I meant is that they are less noisy in an absolute sense.
IOW, for a given real world exposure, higher ISOs add less noise to the RAW data. If you are using a fixed set of Tv and Av values, and just varying the ISO, shot noise does not vary. Shot noise has nothing directly to do with the ISO setting; it is only related in the sense that a high ISO clips away the sensor ranges of exposure where the lowest shot noise occurs.
In simple theory, shot noise should be the only noise of significance in the midtones and highlights, but read noise is usually kind of nasty, in the sense that it isn't totally random, and my have some patterns which make it much more visible than its statistical strength might suggest. Case in point, the other guy's test this evening. He is looking at midtones, but with the same absolute exposure, with the same shot noise, he got significantly more visible noise in the low ISO shot.
Ray - some qualifications on aspects of your suggestions, I think. Firstly, if the camera is in an auto exposure mode, changing ISO inversely changes the exposure so one shouldn't get closer or further to/from the desired ETTR setting unless one bumps into a constraint. If the approach is to change ISO, I do believe one must move into manual mode to preserve the exposure settings and move the histogram rightward, or again in manual mode over-ride the auto setting at a given ISO and expose more.
Well, you can do that just as quickly sometimes with the EC control.
(John, I believe, perhaps incorrectly?, that there are trade-offs between these options.)
I'm not sure I'm parsing your grammar there, but the general idea is that whatever amount of light you decide to capture, the best ISO is the one that comes just short of clipping desired highlights. This is very valuable with Canon DSLRs, the more recent Nikons, and possibly others I'm not aware of, and it applies to a smaller degree to older Nikons and most other non-Canon DSLRs and P&S cameras. There are indeed some cameras out there that do worse by using high ISOs than by under-exposing at low ISOs. My Panasonic FZ50 is like that. For any ISO greater than 200, it is better to shoot RAW and under-expose ISO 200. It seems to use a really nasty amplifier to achieve high ISOs.
Secondly, when shooting raw of course, contrast, saturation and sharpening is not relevant - it should all be turned off/neutral so one imports an image as raw as it gets from the camera to the raw converter. Working from camera-baked jpegs I can see may be another story.
Well, you can apply the same principles to JPEG, but JPEG will just have more limitations on how far you can take things. I often use the 2.5 MB embedded JPEGs to make small images, even though I shot in RAW, and exposed to the right, but I have the JPEG contrast set to minimum, and the saturation at -1, and I can pull down ETTR JPEGs by lowering the gamma to 0.8 in post-processing.