I am an Indian holding a valid passport with a valid F1 (student) visa. I want to travel to Europe for my break. Can I travel there without applying for a Schengen visa? I have heard that US visa holders don't need a visa to travel to Europe. If so, is it applicable for F1 visa holders as well?
No. You will need a Schengen visa.
Holders of US visas are exempt, in certain cases, from the need to obtain a Schengen transit visa (see Do I need a visa to transit (or layover) in the Schengen area?) if they don't need to enter the Schengen area and simply need to change planes once within the zone, but that exemption does not extend to visitor visas.
I have heard that US visa holders don't need a visa to travel in Europe
Whoever told you that is wrong
To enter the Schengen Area, you must have a Schengen visa, and holding another country's visa, even from a non-Schengen EU country, does not exempt you.
You cannot travel Europe with US visa but it will ease the process of getting Schengen visa for you.
As others have pointed out, you do need a Schengen VISA. You might have either misheard the person who told you, or they might have misspoke - what's true is that US Passport holders don't need a VISA to visit most (all?) Schengen nations.