<p>When working with tables in Oracle, how do you know when you are setting up a good index versus a bad index?</p>

Here's a great SQL Server article:
http://www.sql-server-performance.com/tips/optimizing_indexes_general_p1.aspx
Although the mechanics won't work on Oracle, the tips are very apropos (minus the thing on clustered indexes, which don't quite work the same way in Oracle).