I use the index cards to jot down major chunks of action and important dialogue. Then I move stuff around, add cards, remove cards, rearrange entire scenes, etc. The story becomes like a piece of clay, you can mold it into whatever you want. Basically, every important piece of story goes on a separate card.
This isn't an actual story, but here's an example of how it works, if I'm working on a particular scene, that series of cards might look like this:
Carjacker stands patiently at a red light for several hours, waiting for a BMW that matches the one on his list.
A brand new BMW stops at the light. The carjacker opens the passenger side door and gets in.
The carjacker points a gun at the driver and says, "Get the fuck out!" But the driver refuses.
The carjacker smashes the driver in the nose with the butt of his gun, knocking him unconscious. The carjacker reaches over the driver, opens the car door, and kicks the driver out onto the street.
The carjacker drives away as the unconscious driver bleeds on the pavement.
Obviously, I don't number the cards, they get moved around a lot and everything is subject to change, so only the action or dialogue goes on the card, nothing else.