NOTE: These settings will cause as many hard tabs as possible being used for indentation, and spaces will be used to fill in the rest.

• If you want to distinguish between “indentation” and “alignment”, i.e., the number of hard tabs equals the indentation level, use the Smart Tabs plug-in.

• The principle is to set set shiftwidth and set softtabstop to the same value, leave expandtab at its default (noexpandtab).
  • Usually, tabstop is left at its default value.

NOTE:

• set expandtab allows to replace the tabs by white spaces characters :h 'expandtab'.

• set shiftwidth=2 makes the tabulations be 2 white spaces :h 'shiftwidth'.

• set autoindent: to automatically indent newlines.
  • autoindent essentially tells vim to apply the indentation of the current line to the next (created by pressing <enter> in insert mode or with O or o in normal mode.

• set smartindent: reacts to the syntax of the code.
  • smartindent reacts to the syntax/style of the code you are editing (especially for C).
  • When having it on you also should have autoindent on.
• :help autoindent also mentions two alternative settings:
  • cindent and indentexpr, both of which make vim ignore the value of smartindent.

• You could also be interested by by :h 'tabstop' which defines the number of spaces that a tab character in the file counts for.

• As a bonus see :h 'smartindent' and :h 'autoindent' which are pretty useful.