In short ISO is an optical disk image file whereas qcow2 is the partition/filesystem where an OS is already installed and can be used as template for spinning instances of the same OS type.

An ISO image file is a snapshot of the data and layout of a CD or DVD, saved in ISO-9660 format. This is used burn (create) various OS images on CD/DVD so that later directly used as bootable image.

The QCOW image format is one of the disk image formats supported by the QEMU processor emulator. This image is represented in fixed size block devices in a file. In general QCOW2 supports COW (Copy On Write) and will have smaller file sizes. This also supports snapshoting and zlib compression.