What is the difference between these two file types when saving from Creo Illustrate?
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The .iso file extension is a legacy extension from previous releases of IsoDraw. In the past, IsoDraw used .iso, but then the extension became adopted on an OS level for another file type (I think it's this one: Volume Licensing Service Center) and so there is a potential for conflict and/or possible security issues with using .iso for IsoDraw.
Thus, IsoDraw's file extension was changed to .idr. IsoDraw is still backwards compatible with .iso files, but .idr is what's used today in generating files in IsoDraw.
When doing a File > Save As in Creo Illustrate, I only see the option to save as Illustration (*.c3di) file. Did you mean IsoDraw, as explained above by Jared? If so, did his explanation help answer the question?