Nymphing has historically been touted as the most difficult form of fly fishing because a 6th sense supposedly had to be developed to detect when the fish had the fly on a dead drift. Others would keep a taut line so that they would feel the hit, but this technique wouldn't allow a dead drift.
Strike indicators solve both problems of strike detection and natural dead drift as well as being generally easier and more fun. Let me describe how to properly fish nymphs and other wet flys with a strike indicator.
First, let me say that strike indicators let you detect strikes quicker and follow the drift of the fly. They also allow you to fish at much greater distances and therefore cover much more water. This translates into more caught fish.
With the standard cast, a nymph is cast up and across stream with an in the air mend to create the upstream curve. The fly can be swung around so that is actually below the indicator. This cast takes practices, but allows the fly to sink quickly and drift longer without need of additional mending of the line. At its deepest point, it may need a mend to avoid drag caused by bellying line. Part three shows how to continue a drag free float below your position by wiggling out line from the rod tip before the line starts to belly again. This way a 30-foot cast can be made into a 50-foot drift.
The trick to making this technique work properly is line manipulation. Curves must be maintained in your line to avoid drag. Sometimes this requires a number of mends called "stack mending." If at all possible, the strike indicator should not be moved much during the mend, but if you are going to mend the line, make sure you do it right up to the strike indicator.
If the strike indicator is going slightly slower than the surface currents, that means your fly is in the slower currents near the bottom. This is very desireable because it is this lower section of the water where most strikes occur if the drift is natural and not dragging. Enough weight must be used to drift the flies just off the bottom. You should adjust the weight constantly to maintain the proper depth.
Good strike indicators are made of cork painted bright colors, small sections of fly line threaded on leader, adhesive backed foam, poly yarn tied to leader and dressed with floatant, or any other form of floating material that is easily seen. The indicator should be placed about twice the depth of the water, as far as distance goes, from the fly or flies.
Strike indicators are also extremely useful for surface or just subsurface flies. Midge adults, pupae or larvae imitations can easily be fished this way. Normally, they are all but impossible to track. Mayfly emergers or caddis pupae imitations are also successfully fished this way when they are hatching.
Any unnatural movement by the strike indicator should be presumed to be a strike and the hook should be set properly. The indicator may jerk down under, shoot across stream, slown down and slip under or just stop. It may be a rock, but must be assumed to be a fish. The quicker you strike (set the hook) the more fish you will hook.
As you learn these techniques, you will find your success rate going up, and find yourself gaining many minute skills that will up your success rate even more with practice. It's also the most fun way to fish nymphs that I've found.