An artificial variable used to express a qualitative variable with unordered categories. If the qualitative variable has just two categories, a single indicator variable takes the value 1 or 0 according as the first category is present or absent (0 indicates the presence of the other category). Thus, the indicator a coding variable for a particular attribute.
In general, a qualitative variable with k levels is coded with (k-1) indicator variables, each taking the values '1' or '0', where '1' indicates that the corresponding level is present and '0' that it is absent. The presence of the last remaining category is expressed by setting all the (k-1) indicator variables to 0. Indicator variables are also called dummy variables.
On Using Indicator Variables from Minitab: - http://www.minitab.com/resources/articles/IndicatorVariables.pdf The Use of Dummy Variables in Regression Analysis - by MoreSteam.com - http://www.moresteam.com/whitepapers/dummy-variables.pdf