Microsoft Website: The Indexing Service extracts information from a set of documents and organizes it for easy access through the Windows XP Professional Search function, the Indexing Service query form, or a Web browser.
When this feature is turned off Windows Explorer simply uses conventional search techniques. The use of the service is a popular utility for Web Servers as opposed to everyday use by the average home user.

There are some very useful utils at www.sysinternals.com to monitor registry & file access/changes. These may help to see if any errors occur and where they are located.