Selectivity doesn't tell the whole story. Say there are 10 pending applications and 1.000.000 closed ones. Then an index on status is not very selective, but it's still very useful! The index would help people quickly browse pending applications, which may be something they frequently do.
One other example is a ticketing system. Most of the work is done on open tickets. So while the status for a ticket isn't very selective, it's still an excellent candidate for an index.
P.S. Only the leftmost known columns of an index can be used to resolve a search. For example:
select * from Users where name = 'fred'
An index on (name)
can be used to resolve this query, but an index on (active_date, name)
can not.