An indicator provides a measure of a concept, and is typically used in quantitative research.
It is useful to distinguish between an indicator and a measure:
Measures refer to things that can be relatively unambiguously counted, such as personal income, household income, age, number of children, or number of years spent at school. Measures, in other words, are quantities. If we are interested in some of the changes in personal income, the latter can be quantified in a reasonably direct way (assuming we have access to all the relevant data).
Sociologists use indicators to tap concepts that are less directly quantifiable, such as job satisfaction. If we are interested in the causes of variation of job satisfaction, we will need indicators that stand for the concept of ‘job satisfaction’. These indicators will allow the level of ‘job satisfaction’ to be measured, and we can treat the resulting quantitative information as if it were a measure.
An indicator, then, is something which is devised that is employed as though it were a measure of a concept.
Direct and Indirect indicators
Direct indicators are ones which are closely related to the concept being measured. For example questions about how much a person earns each much are direct indicators of personal income; but the same question would only be an indirect measurement of the concept of social class background.