The Volatility Index, often referred to as the 'VIX', is a financial index that reflects the market's expectations of volatility over a specified period. It is derived from the prices of S&P 500 index options and is used widely as an indicator of market sentiment. A higher VIX value indicates greater expected volatility and market uncertainty, while a lower value suggests a more stable market. Investors and traders use volatility indices to gauge market conditions and to guide trading and investment strategies.