An index normally isn't used in a fiction book. You don't need to read Pride and Prejudice and track down all references to Elizabeth. However, an index can be quite helpful in a non-fiction book. In this example, from my Sangria Recipes book, a reader can easily see all recipes that involve oranges. That way if the reader has a pile of oranges in their kitchen, they can know what recipes are available to use them up.
Indices can be used for ingredients, for company names, and for pretty much anything else that a person might legitimately want to track down in a book.
Of course, this is mostly useful for paperback books. People using Kindles or other e-readers have a search function. They don't have to go slogging to an index and then poking through it. They simply hit "search", type in the term, and they can find it anywhere. So that is the more efficient solution.
So think of an index as the old fashioned search tool for the analog world :).
In a paperback book, the index is usually listed in the table of contents. As such, it should have a page number to go to. Often it is the very last thing in the book.
You don't make the index by yourself, just as you don't make the table of contents by yourself. Both would be annoying to maintain every time you added or removed letters. Instead, you just tag words you want to include in the index with the Word index function and let it generate the index for you. That way as you add and remove pages you just regenerate that index and it properly links to all of the words' new locations.
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