Indexes are normally stored inside the Manila website to which their variable belongs. Some indexes can grow rather large and change frequently, if for example the text of messages in an active discussion group is indexed by word. In these circumstances, its better to place the index data elsewhere. This is what setting external index does.
One additional Frontier root database is used for this purpose, it is placed in the ops sub-folder of Frontier Guest database folder and its is called addedValuesIndex.root.