I have a .iso file which installs a program.
Do I need to burn it / mount it on a virtual drive? Or does decompressing it work as well?
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For a program/piece of software, most likely not. You should be able to extract the files from the image and run the necessary setup files.
For an OS, yes. You will need to either burn it to a disc or use a utility like UNetBootin to write the image to a USB drive.