Back when I did a couple of certificates in IT (~15 years ago) I used to know the technical difference between RGB and Indexed, but the gist is that Indexed reduces the number of colours stored in the image file the less colours, the smaller the image file. Converting to indexed always reduces the image quality though as some colours are converted to the closest shade.
Editing is almost never done in indexed mode due to the limited colours you can use, also, with indexing there is no variation in transparency I don't think, just "on" or "off" for each pixel, but I'm sure you've already worked that out.