Question:  How does an indicator work?

Answer:

Indicators are compounds which turn different colors when H+ is added and taken away.  For example, phenolphthalein appears pink in basic solutions because the extra H+ has been removed.  When in acid,
the solution is clear because the H+ is present.  Because the H+ can be easily removed or returned, this
indicator can change back and forth from pink to clear a limitless number of times.

Not that you asked, but the reason that different indicators change colors at different pH values is that the H+ sticks to the indicator differently based on its chemical structure.  For some indicators, the value at which it turns colors is very close to 7.  For other purposes, it's sometimes handy to have an indicator that changes color at different pH values.