Indexes in Microsoft SQL Server help retrieve data quickly by reducing the number of Disk IO operations. They work like a dictionary, with words (data) and definitions (results) linked together for easy access. Using index structures like B-Trees or Hash Indexes, the database can fetch data faster by searching through fewer pages. When a record's indexed value is changed in a clustered index, the entire row may need to be moved, affecting query performance. Clustered indexes are often based on primary or foreign key columns to maintain data order.