Welcome to the forum, swing8082.
The author, David Lindsay, is being quite creative in his use of English. This is my understanding of what he has written.
"like a stab of forked lightning" - He has invented his own version of the phrase "as quick as lightning", or "like a flash".
"shot together" - This again conjures up the image of something moving very fast "like a shot" (i.e. like the speed of a bullet). "Shot together" in this context where a large cloud becomes smaller, means "contracted very rapidly".
"indented" - Yes, you are right. It means having irregular edges. In the case of a cloud they would look something like this I imagine: http://tinyurl.com/ngm87bq .