What's The Difference Between Index.php and Archive.php?

I’ve been working with Custom Types and so far I’ve just been querying them like a blog through index.php. I do know with templating I could mak a custom_type-archives.php but I’m not entirely sure what archive is for. I would rather use my index.php for blog posts and a different index.php like template for my custom post types which I thought would be archives.

So what’s the difference between what I can do with index.php and what archives.php does?