How do I create an index list in Excel?

Can you explain, step-by-step, how to create an index list in Excel? Perhaps you could start by detailing what an index list is and why it's useful, then move on to outlining the process for creating one. Also, if there are any specific functions or tools in Excel that are particularly helpful for creating an index list, please be sure to mention those as well. I'm eager to learn more about this process and how it can benefit my work with Excel.