The ratio of the number of distinct values in the indexed column / columns to the number of records in the table represents the selectivity of an index. The ideal selectivity is 1. Such a selectivity can be reached only by unique indexes on NOT NULL columns.
Example with good Selectivity
A table having 100'000 records and one of its indexed column has 88000 distinct values, then the selectivity of this index is 88'000 / 10'0000 = 0.88.
Oracle implicitly creates indexes on the columns of all unique and primary keys that you define with integrity constraints. These indexes are the most selective and the most effective in optimizing performance. The selectivity of an index is the percentage of rows in a table having the same value for the indexed column. An index's selectivity is good if few rows have the same value.
Example with bad Selectivity
lf an index on a table of 100'000 records had only 500 distinct values, then the index's selectivity is 500 / 100'000 = 0.005 and in this case a query which uses the limitation of such an index will retum 100'000 / 500 = 200 records for each distinct value. It is evident that a full table scan is more efficient as using such an index where much more I/O is needed to scan repeatedly the index and the table.