Unclustered

An Unclustered index is structured in a way that doesn't correspond to the order of the actual data records. It resembles the words index at the back of a book. For this reason, it will perform worse than clustered indexes on ranged searches where the result set is large, since each result could cost an additional I/O-operation to get the actual data record. One can have any number of these kinds of indexes, that is required is the space to store the index itself -- one does not copy the actual data to create a new index.

Clustered

Clustering alters the data block into a certain distinct order to match the index, hence it is also an operation on the data storage blocks as well as on the index. An address book ordered by first name resembles a clustered index in its structure and purpose. The exact operation of database systems vary, but because storing data is very redundant the row data can only be stored in one order. Therefore, only one clustered index can be created on a given database table. Clustered indexes can greatly increase overall speed of retrieval, but usually only where the data is accessed sequentially in the same or reverse order of the clustered index, or when a range of items are selected.

Since the physical records are in this sort order on disk, the next row item in the sequence is immediately before or after the last one, and so fewer data block reads are required. The primary feature of a clustered index is therefore the ordering of the physical data rows in accordance with the index blocks that point to them. Some databases separate the data and index blocks into separate files, others put two completely different data blocks within the same physical file(s).Clustering is a great example of Indexing and is far more sophisticated than an unclustered index.

[http://en.wikipedia.org/wiki/Index_(database)]