Indexing is the process of a search engine crawler (software that looks for web pages) finding your website and going page to page recording the contents of each page. The way that the crawler (also called a spider) finds its way around the web is by following links or from being sent there by a sitemap.xml file. It goes from one link to another, within a website and from website to website. The information that is retrieved is then sent to a data center where it is subject to the search engines algorithm. This algorithm is a mathematical equation that uses this indexed data to form a rank for all the different words that are on the page.
Notice we said words. Why? Because words are what humans type into a search engine to try to find what they are looking for. The search engines job is then to return the best possible results to that searcher. So when you click on those results and go to that website you have a great chance of finding what you where looking for.
The reason that Google is the most popular search engine on the web by far is mainly because their algorithm is so good that you will almost always find what you are searching for on Google. So does this mean that all a business need to do is throw up all sorts of words related to their business and they will now be #1 on Google, Yahoo and MSN. Absolutely not. Search engine algorithms have become very complex and sophisticated and are almost impossible to trick into giving great results without earning those results the old fashioned way. Blood (great content), sweat (links) and tears (time).