Microsoft Search Server is a separate service that is installed as part of the SQL Server 2000 product. It is included with Enterprise, Standard, and Developer Editions, but not Personal Edition. The Search Server runs as a separate service, so you can disable it if you do not make use of it.
The Search Server creates indexes on the Windows file system completely outside of SQL Server. These indexes are similar in structure to the nonclustered indexes used by SQL Server. Search Server uses B-tree indexing for each discrete word, with pointers to the table, column, and location of those words. This allows the index to find specific words very rapidly and with small amounts of work.
The Search Server will pull the data to be indexed out of the SQL tables and break it up into single words. Certain words, called noise words, will be dropped from the index. Noise words, which are language-specific, are words that are so common, that any indexing would be counterproductive. You can look at the list of noise words for your language by looking in c:\Program Files\Microsoft SQL Server\FTDATA\SQLServer\Config.
The full-text index keeps track of each word and the key values for rows where the word can be found.