For gamers using emulators like RPCS3 (PS3), Xenia (Xbox), or even PS2 emulators, the ISO format is king. It is a raw, bit-for-bit copy of a disc. However, digital downloads on PlayStation consoles come exclusively as .pkg files (PackaGe).
If you are using RPCS3 , you should never convert PKG to ISO. RPCS3 runs PKG files perfectly via "File → Install Package." Converting is extra work for zero gain.
Happy modding, and always backup your original files before attempting extraction.