Consider a compact manifold $M$ equipped with some $S^1$-action, and let $E,F$ be vector bundles over $M$. Suppose further that a fixed elliptic operator $D:\Gamma(E)\to\Gamma(F)$ is preserved under the action (i.e. the induced action on $E,F$ commutes with $D$). Then its index $ind(D)=Ker(D)-Coker(D)$, as a virtual vector space, is also acted on by $S^1$.
The point now, which I just don't quite understand, is that this index can then be written as a finite sum of irreducible 1-dimensional representations $ind(D)=\sum_na_nL^n$, where $a_n\in\mathbb{Z}$ and $L^n$ is the representation $e^{i\theta}\mapsto e^{in\theta}$ of $S^1$ on $\mathbb{C}$.
What does this mean / what is this procedure / why is this true? I guess I'm just confused with the terminology and everything.