Definition
The altitude read directly from a sensitive altimeter when its barometric scale (Kollsman window) is set to the current local altimeter setting. It represents the aircraft's height above mean sea level as displayed, uncorrected for nonstandard temperature.
Plain English
The altitude number you actually see on the altimeter face after you've dialed in the correct local pressure setting. It is what the instrument is telling you right now.
Context Anchor
Seen when reading the altimeter in flight, setting the altimeter before takeoff, and comparing your displayed altitude with assigned or required altitudes.
Derivation
From Latin 'indicare' meaning 'to point out or show.' The term simply refers to the altitude the instrument is pointing to or showing, as opposed to altitudes you have to calculate (like true or density altitude).
Why Pilots Care
Maintaining the assigned indicated altitude keeps the aircraft at the correct flight level for traffic separation and terrain clearance when the altimeter setting is accurate.
Intuition Check
Indicated does not mean exact. It means shown by the instrument with its current setting.
Example Sentence 1
After dialing 30.02 into the altimeter, the pilot's indicated altitude read 3,500 feet, matching the assigned cruising altitude.
Example Sentence 2
After entering the airport's altimeter setting, the indicated altitude on the ground matched the published field elevation.