An exchange-traded fund is an investment fund operating on the stock exchange holding assets such as stocks, bond or commodities. An index fund, on the other hand, is a mutual fund or an ETF constructed to follow a specific industry or index.
Now what technically Index ETF fund is? It basically an Exchange Traded Fund constructed to follow a specific index.  Under ETFs investment is made in different stocks altogether, that can also be for short term and any notional profit/loss is realized so as to minimize the risk. Index here means to say, top 50 companies of a particular industry.

Under ETFs whatever dividend comes with the investments in different stock, it is all paid. To pay out these dividends most ETFs pay-out dividend quarterly by holding all of the dividends paid by underlying stocks during the quarter and pay them to the shareholders on pro-rata basis or on the basis of the number of shares held by each shareholder.

Allocation of dividend:
Suppose there are 200 shares of an ETF outstanding, and an investor owns 10 shares of that ETF, he would hold the right to receive 5% of the total dividends earned by the ETF. If ETF is combined of 10 different dividend-paying underlying stocks, the total amount of all those stocks shall be pooled quarterly and all the shareholders shall be paid on the basis of their shareholding.