Iodine is known as an indicator because it changes color in the presence of starch and several other molecules. Iodine can also be used to track iodide and iodine in its elemental form.
Elmhurst College describes iodine as a crucial indicator that is used in several different tests. Iodine is most commonly used to test for starch, as the chemical reaction that occurs when the two elements meet results in a change of color of the iodine molecule. Iodine is also frequently used to follow the changes of an iodide ion and iodide element. When iodine is present with either one, a blue-black color will result that does not otherwise occur.
Frostburg's General Chemistry online further explains the nature of iodine as an indicator of starch. When iodine and starch are placed together, the mixture takes on an intense blue color. This color is unique to the interaction of iodine and starch, as neither element produces this reaction on its own or in conjunction with other elements. Chemists do not fully understand what causes this reaction, but many speculate that iodine ions become trapped within the coil of the starch's beta amylose molecules. The iodine ions are then forced into a different arrangement, which results in the color shift.