Isolation testing is the process of breaking down the system into various modules so that defects can be spotted easily in isolation. It happens especially when the bug is difficult to locate and resolve by development team.
It is a time-consuming process and there should be stubs and drivers available to retest each one of them individually
It is expensive as all the items are to be broken into several pieces to make it atomic in nature.
It verifies the output of each one of those interfaces/subsystems precisely.