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As defined by the Environmental Protection agency (EPA), "biological indicator species are unique environmental indicators as they offer a signal of the biological condition in a watershed. Using bioindicators as an early warning of pollution or degradation in an ecosystem can help sustain critical resources. While indicator species is a term that is often used, it is somewhat inaccurate. Indicators are actually groups or types of biological resources that can be used to assess environmental condition."
In other words, it's the proverbial canary in a coal mine.
WiseGeek.com adds: "Numerous plant and animal species are used as indicators, along with organisms like lichens and fungi, in environments ranging from mountaintops to the continental shelf. The presence of an indicator species often defines a specific ecoregion. For example, a certain type of tree may only grow in a very specific area, or a specific mammal may only roam in a particular region. If the species begins to disappear, the ecoregion could be said to be shrinking, and it might raise concerns about the health of the environment in that area."
Just in case any of this is making sense to you, Wiki has seven other definitions.
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