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I've noticed that ATC sometimes calls out traffic (a traffic advisory?) to aircraft using the "altitude indicates" phraseology, and sometimes a specific altitude is given without the phrase "altitude indicates".

Is there a specific reason for when they use one over the other?

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"Altitude indicates" means that the aircraft has a Mode C transponder but it isn't receiving radar service, i.e. it's VFR and not on flight following. In other words, the transponder is reporting an altitude, but because the aircraft isn't in contact with ATC, they can't be sure about its altimeter's integrity or the pilot's intentions.

See the ATC orders 2-1-21:

For aircraft displaying Mode C, not radar identified, issue indicated altitude

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    $\begingroup$ Mode C is unaffected by altimeter setting $\endgroup$
    – user71659
    Commented May 31, 2018 at 6:10
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    $\begingroup$ To follow on @user71659 - transponders report the pressure data directly before converting to an altitude. Since ATC always knows the most current atmospheric pressure it is always more accurate for them to calculate the altitude directly rather than to rely on whatever setting the pilot may have selected in the cockpit. This guarantees a single conversion factor and ensures their display gets the relative position of all aircraft correct. $\endgroup$
    – J...
    Commented May 31, 2018 at 12:01
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    $\begingroup$ When you first check in with ATC, you tell them your altitude. If it doesn’t match what they are seeing, they will ask you to verify. If it is far off, they sometimes ask you to turn off your altitude squawk. $\endgroup$
    – JScarry
    Commented May 31, 2018 at 18:30
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There's 2 types of radar in ATC, there's Primary Radar which gives bearing and distance, but it can't give altitude, which is why there is Secondary Surveillance Radar (SSR) which interrogates airplane transponders. When a transponder is on and set to mode C or S the controller will see flight level on their screen. Flight level is altitude adjusted to standard pressure (1013hPa):

ATC radar

When a controller gives a traffic report and they haven't had a reported altitude from the aircraft they'll either report the aircraft's transponder reported flight level or altitude in feet which is the transponder reported flight level adjusted for local pressure. A controller may also use the transponder reading if the airplane has changed altitude since its last report, say because they are maneuvering, doing practice forced landings, etc.

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    $\begingroup$ MSL is wrong here no? Mode C will be flight level I thought? $\endgroup$
    – jk.
    Commented May 31, 2018 at 12:58
  • $\begingroup$ Good point @jk, I have edited to clarify. $\endgroup$
    – GdD
    Commented May 31, 2018 at 13:32
  • $\begingroup$ When below transition altitude, ATC will see AMSL altitude, not flight level. The transponder transmits the flight level but the automation translates this into an altitude based on the local QNH. $\endgroup$
    – randomhead
    Commented Jun 1, 2022 at 0:47
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ATC is looking at the altitude reported by the aircraft's mode C transponder. They have to talk to that aircraft and verify that the altitude is correct before they can trust that information. This is part of "radar identifying" a target. If a target is not radar identified, they just say "altitude indicates."

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"Altitude indicates" means it is a random target and the controller is going by the only information available, the Mode C encoded altitude readout showing on the display. If that phrase is not used, the controller is likely referring to an aircraft flying an altitude associated with a clearance as confirmed by the pilot (and backed up by the encoded altitude displayed for that target also).

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