What does the isolation valve do in the landing gear extension/retraction system?
As a general answer: the purpose of an isolation valve is to separate two (or more) parts of a hydraulic system from each other. The separation is necessary to prevent a failure of one part of the system affecting the rest of the system. For example, a leak in landing gear actuator system might bleed the entire system - rendering the whole hydraulic system inoperable. 

An isolation valve may also be used to prevent system operation if certain conditions are not fulfilled. Say, if airspeed is above a predetermined limit, the isolation valve would remain closed preventing the operation of the gear.