An isolated system is defined as one that does not exchange matter or energy with its surroundings, essentially existing independently. This concept is crucial for understanding charge conservation, as the total charge within an isolated system remains constant over time. In contrast, open systems can exchange both matter and energy, while closed systems only exchange energy. The discussion highlights the uniqueness of isolated systems, likening them to entities that exist alone in the universe. Overall, the conservation of charge in isolated systems is a fundamental principle in physics.