All the LEDs are on the front of the board.
There are two LEDs fitted. D9 and D10.
They are connected directly to two GPIO lines on the pxa CPU. Thus they can be used as you see fit.
By default (from kernel 2.6.29 onwards), they indicate NAND access and CPU activity.
NAND access (LED closest to the FPC connector) is just lit whenever the NAND is being accessed - this is useful for seeing when the device is busy reading/writing.
The CPU indicator flashes steadily unless it has crashed horribly. It flashes faster when the CPU is busier.
Both of these are done with standard 'LED drivers' in the kernel. These can easily be replaced or swapped out...
Here is info on older Balloon2LEDs.