This paper presents a new optical integrated sensing and communication (O-ISAC) framework tailored for cost-effective Light-Emitting Diode (LED) for enhanced Internet of Things (IoT) applications. Unlike prior research on ISAC, which predominantly focused on radio frequency (RF) band, O-ISAC capitalizes on the inherent advantages of the optical spectrum, including the ultra-wide license-free bandwidth, immunity to RF interference, and energy efficiency -- attributes crucial for IoT communications. The communication and sensing in our O-ISAC system unfold in two phases: directionless O-ISAC and directional O-ISAC. In the first phase, distributed optical access points emit non-directional light for communication and leverage small-aperture imaging principles for sensing. In the second phase, we put forth the concept of optical beamforming, using collimating lenses to concentrate light, resulting in substantial performance enhancements in both communication and sensing. Numerical and simulation results demonstrate the feasibility and impressive performance of O-ISAC benchmarked against optical separate communication and sensing systems.