The Isolate Selection tool lets you edit a single object or selection set of objects while hiding the rest of the scene on a temporary basis. This guards against selecting other objects while working on a single selection. It allows you to focus on the objects you need to see, without the visual distraction of the surroundings. It also reduces the performance overhead that can come from displaying other objects in the viewports.
When you turn on Isolate Selection, the active viewport (Perspective and axonometric only) performs the Zoom Extents action on the isolated objects. When you exit Isolate Selection mode, Perspective viewports return to the previous zoom level, but axonometric viewports do not.
When an isolated selection includes multiple objects, you can select a subset of these, and choose Isolate Selection once again. This isolates the subset. However, clicking Exit Isolation unhides the entire scene. You can’t “step back” through individual levels of isolation.