An index combines the prices of its member companies. Most, like the S&P 500, weight companies by market value, so the largest companies move the index most. The Dow Jones is weighted by share price, an old convention.
The level in points has no meaning on its own; compare changes over time.
Why it matters
Indices summarise how a market as a whole is doing, and index funds let investors own the whole basket cheaply. The S&P 500 is a large part of most Australians' superannuation through international shares.
On FinVolio
Index returns are price returns: dividends are not included, so the return to an investor in an index fund is higher.
See the data: S&P 500, Nasdaq.
General information, not advice.