Each section of the code refers to a different piece of information. For example, in the code 978-0-9883646-0-8 the initial prefix “978” identifies the item as a book, the following “0” means it is written in English (a “1” may also be used). The next long string of numbers identifies the publisher. The following “0” represents the title and edition of the book (electronic in this case). The last number is a verifying code based on an algorithm that you don't need to know about.
In the United States ISBNs are distributed through Bowker. You can purchase one ISBN for $125, or, if you feeling prolific, you can purchase a block of ten for $250. The question is, do you need one if you are self-publishing?
When you need an ISBN
If you are thinking of putting your book into print, whether it's through print-on-demand, or any other self-publishing print venue, you will need an ISBN. You will also need the barcode that is normally found above (and below) the ISBN. (Barcodes can be purchased through Bowker, or obtained free at http://www.tux.org/~milgram/bookland/) Without an ISBN, no library will ever order your book, no book store will stock it, no one will review it – your book may as well not exist.
When you don't need an ISBN
If you are epublishing, you don't need to purchase an ISBN. Amazon doesn't require one. (Amazon assigns its own code, an ASIN number). Barnes & Noble has gone that route as well. If you decide to distribute your ebook through Smashwords, they will assign an ISBN from their own stock. (The long string of numbers in the middle of the ISBN code will identify Smashwords as the publisher.)
When I published my ebook I didn't realize how useless an ISBN was going to be. Not knowing the ways of libraries, I assumed they would be able to order my ebook via its ISBN number. At the time, I didn't realize that libraries only order books – print or electronic – through distributors. To my dismay, I discovered that distributors deal only with publishing houses. (In my state, the distributor is OverDrive. But in other states, Smashwords and other ebook publishers may be used.) The problem was, even though I was giving my ebook away for free, no library would take it. So my rationale for buying the ISBN was wrong.
If you are planning on starting with an ebook, but are on the fence about about whether to self-publish in print format (or are considering trying to snag a publisher), you can always purchase an ISBN later. My advice is to wait.