‘Iron’ as prefix is used for people who took tough and path-breaking decision in their lives. Like-Sardar Patel is called Iron man for integration of princely states post-independence. Margaret Thatcher in Britain, Golda Meir in Israel etc. are some other examples.
Indira Gandhi is called Iron Lady of India for various reasons like- Bank nationalization, ending the privy purses of princely states, leadership during Bangladesh war, Imposition of emergency, curbing power of judiciary and finally Operation Blue Star in Golden Temple at Amritsar. Her assassination was considered as a sacrifice for the nation.
Another reason why Mrs Gandhi got this title was that this title was not already given to somebody. For example we can’t call Lata Mangeshkar Nightingale of India because that title is already given to Sarojini Naidu