Frequently I see this in progress. What does it mean? Is it needed for eclipse work or it is like advertisement?
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Eclipse uses a virtual filesystem under the hood for all resources. This filesystem management has some common mechanism to make an access possible through a single interface so that you can use all the features for accessing and manipulating resources no matter if they are local or remote (your Navigator-View for instance has no idea about local or remote resources..).
This “common interface” holds some meta-information about the file and folder structure of all projects (local or remote or whatever). For updating/creating these meta-information Eclipse index these files. This is no cache of the entire file, only meta-information of all files are collected.
So to your questions:
No it doesn’t. It only builds several indexes of meta-information for all files (so that you can use for instance the ctrl+shirt+r dialog)
Yes it does. This is an essential mechanism for Eclipse which is also needed for the incremental Builder-Infrastructure.