When you download Windows 7 ISOs from MSDN or TechNet, you'll notice that there are several versions of the same disk. These downloads include the Home Premium, Professional, and Ultimate editions.
An ISO-9660 image file is an exact representation of a CD or DVD, including the content and the logical format. The Windows 7 binaries for each edition are identical, it's the product key that unlocks the various features that make each edition what it is.
There is a small file called ei.cfg in the \sources folder of each ISO that "locks" them to each edition. If this file is deleted, it unlocks the ISO and allows you to select to edition of the Windows 7 operating system to install, as shown below:
As you can see, this not only allows you to install Home Premium, Professional, or Ultimate editions, it also allows you to install Starter or Home Basic editions. Starter and Home Basic editions are less featured and are designed for emerging markets and low powered netbooks and laptops.
You can edit the ISO to remove the ei.cfg file using any ISO editor, such as PowerISO or UltraISO. Keep in mind that you will have to rebuild (save) the new ISO, which can take some time and disk space.
An even better way to do this is by using a cool little utility called eicfg_remover from code.kliu.org. The utility disables the ei.cfg file by toggling the deletion bit in the UDF table in the ISO to treat it like it no longer exists. This eliminates the need to rebuild the ISO and makes it possible to reverse the patch, restoring it to its original state. Just run eicfg_remover again to do so.
By creating a "universal" Windows 7 disk, you'll save disk space and increase the ISO's versatility.