I fell in love with Iz's serene rendition a few years ago when it was background in a toy store commercial, of all places - downloaded it from iTunes right away. The album is "Alone in IZ World", released in 2001. It's so sad Iz died so young. And the song was used in an episode of "ER" - when Dr. Mark Green was in Hawaii in the final throes of cancer, he played that song as he passed away.
This album's version is different than what Tigger mentioned - there's no "Wonderful world" at the end. Iz actually does butcher the words a bit, and at the song's end he does something what I can only describe as Hawaiian gutteral emissions, but overall the song is very lovely. I've used it in many family photo slideshows, with plenty of tissues on hand.