An App Engine application defines its indexes in a configuration file named index.yaml. The development web server automatically adds suggestions to this file as it encounters queries that do not yet have indexes configured. You can tune indexes manually by editing the file before uploading the application.
The App Engine datastore maintains an index for every query. As the application makes changes to datastore entities, the datastore updates the indexes with the correct results. When the application executes a query, the datastore fetches the results directly from the corresponding index.
http://code.google.com/appengine/docs/datastore/queriesandindexes.html
http://code.google.com/appengine/docs/configuringindexes.html
http://code.google.com/appengine/articles/index_building.html
