Michigan has been playing much better the past 3 games in many ways. They've been much more efficient on offense, even when they've been forced to throw (eg last weekend), they've been dominant on defense, they've been much better on special teams, and they've had a positive turnover margin.
Indiana has challenged Michigan in recent years, but those games have often been surrounded by games in which Michigan wasn't playing well, anyway (certainly that was the case the past 3 years). Against almost everyone else, Michigan has basically dominated inferior competition under Harbaugh. Yes, this is probably the best Indiana time in my life time, it's a home game for them, and they just challenged Penn State in Happy Valley, but I think Michigan will be focused for them and keep playing well.
I'm expecting a game like 34-23, though.