In the natural sciences an isolated system is a physical system without any external exchange – neither matter nor energy can enter or exit, but can only move around inside.This can be contrasted with a closed system, which can exchange energy with its surroundings but not matter, and with an open system, which can exchange both matter and energy. Truly isolated systems cannot exist in nature, other than allegedly the universe itself, and they are thus hypothetical concepts only. An Isolated system is a flask no heat can exit nor can any heat enter.  It obeys, in particular, to the first of the conservation laws: its total energy - mass stays constant.
The concept of an isolated system can serve as a useful model approximating many real-world situations. It is an acceptable idealization used in constructing mathematical models of certain natural phenomena; e.g., the planets in our solar system, and the proton and electron in a hydrogen atom are often treated as isolated systems. But from time to time, a hydrogen atom will interact with electromagnetic radiation and go to an excited state.
In the attempt to justify the postulate of entropy increase in the second law of thermodynamics, Boltzmann’s H-theorem used equations which assumed a system (for example, a gas) was isolated. That is all the mechanical degrees of freedom could be specified, treating the walls simply as mirror boundary conditions. This inevitably led to Loschmidt's paradox. However, if the stochastic behavior of the molecules in actual walls is considered, along with the randomizing effect of the ambient, background thermal radiation, Boltzmann’s assumption of molecular chaos can be justified.
- Thermodynamics of Spontaneous and Non-Spontaneous Processes; I. M. Kolesnikov et al, pg 136 – @ http://books.google.co.za/books?id=2RzE2pCfijYC&pg=PA3&lpg=PA3&dq=isolated+system+hypothetical&source=bl&ots=yCbvTcGaVv&sig=O6E_yw9CCX2zd8PzINxZiYuRT3Q&hl=en&sa=X&ei=_UWqT-z_KsbP0QWXpcz1Dg&ved=0CEgQ6AEwAA#v=onepage&q=isolated%20system&f=false
- A System and Its Surroundings; UC Davis ChemWiki , by University of California - Davis, @ http://chemwiki.ucdavis.edu/Physical_Chemistry/Thermodynamics/A_System_And_Its_Surroundings#Isolated_System
- Hyperphysics, by the Department of Physics and Astronomy of Georgia State University; @ http://hyperphysics.phy-astr.gsu.edu/hbase/conser.html#isosys
- Prof Bryan Sanctuary, Professor of Chemistry. "Open, Closed and Isolated Systems in Physical Chemistry, in Foundations of Quantum Mechanics and Physical Chemistry". McGill University (Montreal).