The .iso file is a Windows installation image. From where it's located and its name, it's most likely the installation ISO that was created when you selected "Get Windows from Microsoft". It was used to install Windows to a virtual machine, and is left in that folder on the off chance that you'd want to create a new Windows 11 virtual machine.
What's puzzling is that your virtual machine should be located somewhere on your Mac's hard drive.
Let's try the easy thing first before telling you to create a new VM and re-install Windows:.
Open the virtual machine library (from the Fusion menu bar, choose Window > Virtual Machine Library) and then see if your VM is listed there. If it is, you should be able to open it from there. If you want to know where it is, right click on the name of the VM in the left hand panel and select "Show in Finder".
If that doesn't work, open Spotlight on the Mac and search for "kind:VMbundle". If your VM is still on your hard drive, it should find it. If you find it, you should be able to open it from the Spotlight dialog and it'll be added to the Virtual Machine Library.
If Spotlight can't find it, something other than Fusion could have removed it from your hard drive. You'll need to create a new virtual machine from the Fusion menu, and drag the ISO file you found on your disk from the Finder to the "Select an Installation Source" dialog. From that point you'll reinstall Windows like you did the first time.