YKT:
As far as I can understand, this number is related with the "practical resolution" or the "practical discrimination" of a measurement instrument. The concept is not very difficult to grasp, but trying to explain WHY is calculated in the way that it is calculated, is another thing...
Here is my understanding with regard to NDC index:
Measurement Instruments have physical limitations to "discriminate" between different parts (i.e. give different values of a dimension for parts that are actually different). An example: The discriminative power of the scale that my wife has in the kitchen is 5 gr. By using this device it will be impossible for me to "discriminate" between packs of flour wheighing 1.010 gr, 1.007 or 1011 gr (eyeballing & rounding is not allowed!). All these three packs will be considered as having the same weight when actually it is not true. The three packs are in "the same category". In this way we start to talk about "categories"
The NDC tells you how many categories your measurement system (MS) is able to diferenciate considering your process variation.
If your NDC = 1 then your MS is useless.
If the NDC = 2 then your MS can only distinguish between two categories ("small" and "big", for example). (useless too)
If NDC = 3 then you have small, medium and big, and so on...
Automotive industries recomend a value equal or greather than five, if I remember well... The greatest the NDC the better.
Of course the term "category" is not physical or tangible. It is an "abstract category".
I hope this helps a little...
Regards.