Your working area (aka workspace or working tree) are the files you’re currently working on.

The index (aka the staging area) is the list of files that you are about to commit to your local repo.

In a nutshell, your workflow is:

Your Working area -> Index -> your local repo

This is very handy:

http://stackoverflow.com/questions/3689838/difference-between-head-working-tree-index-in-git