Create a table of contents with hyperlinks in Google Docs

You CAN use the Outline at the left side of the Document page as an Index it's a little Tab with a sort of Tablet icon below the Toolbar, if you don't see it go to View then select Show document outline and you'll see it show up on the left.

All you do is change each header to a Title. Highlight each one, then in the Toolbar click where it says Normal Text to open the Drop Down Menu, move your mouse over Title and click Apply 'Title' then just change the Font and Size back to what you had it set as.

The only thing is the Normal Text can't be in the same line as the Title so you'll have to start your Normal Text under it.

If you share the Google Doc with others as "View Only" mode the links will work with one click.

Another way to link any text in your google doc, provided you've set up a table of contents linked to your headings, is to highlight the text(s) of interest, right click and select "Link", scroll down to headings and click on it to display all headings and select the heading you would like the highlighted text to link to and click apply.

Aside from creating a Table of Contents (which automatically update, nice!) as indicated by the accepted answer, you can also create Bookmarks which function like standalone headers.

You can also link directly to headers without creating a Table of Contents.

Put the cursor on the header itself, then look at the address bar of your browser. It should change to update the fragment (hash - #) at the end like #heading=h.abc32def4 -- this should correspond to the link created in the Table of Contents. Copy that entire url and use wherever needed.

(Answer copied from another question)

You can create a table of Contents in Google Docs;

1. Add headings to your document by clicking Format > Paragraph styles in the toolbar, and selecting a heading.
2. Click Table of contents from the Insert menu. The table of contents appears wherever you've clicked in the document, so make sure you place your cursor where you want to add the table of contents. If you need to move the table of contents, select it as you would select text and either move it with your cursor or cut it and paste it.
3. You can continue to add headings to your document or change current headings. However, if you'd like a change to become part of the table of contents, you need to click first the table and then the Update now button.
4. Each item in your table of contents links to the titled sections of your document that use the heading styles (that you added in step 1 above).

http://docs.google.com/support/bin/answer.py?hl=en&answer=106342

Hope this helps.