Indentation is leading whitespace (spaces and tabs) at the beginning of a line of code. In the case of Python, they are used to determine the grouping of statements.
Spaces should be preferred over tabs. To be clear, this is in reference to the character itself, not the keys on a keyboard. Your editor/IDE should be configured to insert spaces when the TAB key is pressed. The amount of spaces should be a multiple of 4, except optionally in the case of continuation lines.
Example
def foo():
    bar = 'baz'  # indented one level
    if bar == 'baz':
        print('ham')  # indented two levels
    return bar  # indented one levelif statement, and will only run if the if statement evaluates to True. The fifth and last line is like the 2nd and 3rd and will always run when the function is called. It effectively closes the if statement above as no more lines can be inside the if statement below that line.
Indentation is used after:
1. Compound statements (eg. if, while, for, try, with, def, class, and their counterparts)
2. Continuation lines
More Info 1. Indentation style guide 2. Tabs or Spaces? 3. Official docs on indentation