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Index: a list (as of bibliographical information or citations to a body of literature) arranged usu. in alphabetical order of some specified datum (as author, subject, or keyword); a list of items (as topics or names) treated in a printed work that gives for each item the page number where it may be found...
This is an accurate, albeit, limited description of an index, but do you, the author, need one for your book?
If you have written a non-fiction book the answer is, yes. Potential book buyers can make purchase decisions based on the availability of an index. Librarians, educators and even reviewers can be persuaded to purchase or recommend your book and academics will also turn to an index to appraise your work (You can judge a book by its index). A good index enhances your book and makes it more accessible to your readers.
But can't I just use the "indexing" functions of my word processor to make an index?
Not really. The above definition notwithstanding, an index is not just an alphabetical listing of terms. A word processor is no more able to provide an index to your work than it is able to rewrite it. Word processors don't write books and they don't write indexes—people do.