The ISAAC pipeline is an ESO development to provide reduced data to service mode users, visitors at the telescope and operators who execute service mode observations. The pipeline runs in two modes: on-line (for both service and visitor mode programs) and off-line (for service mode programs).
On-line data reduction happens in the control-room during the night without any human intervention. The goal here is to provide enough information to assess the quality of the acquired data in the shortest possible time. This quick feedback is often useful e.g. to check the image quality in imaging modes. On-line reduced data are not automatically distributed to observers.
Off-line data reduction happens before the data are packed and distributed. The main difference between the on-line and off-line versions is that calibration frames, such as flats and darks, are used.
In both cases, it should be understood that the pipeline does not replace careful data analysis and the trained eye of the astronomer. They pipeline implements recipes that are meant to work in most cases. Most astronomers choose to take the pipeline input as a first guess, then refine some points where the default method is not providing the best results for what they are doing.