A storage indicator is built into the XO-1.5 and XO-1.75. It is the second LED on the left.
The indicator is managed by the main processsor. It is controlled by software.
By default the indicator lights when the internal storage is accessed. A user may learn how to predict the responsiveness of the laptop by watching the indicator.
 Turning on the LED and leaving it on
cd /sys/devices/platform/leds-gpio/leds/storage echo 1 > brightness
(unfortunately this requires root)
 Assigning the LED to another trigger
For example, this makes the LED act as an AC online indicator:
cd /sys/devices/platform/leds-gpio/leds/storage cat trigger [list of possible triggers] echo olpc-ac-online > trigger
XO-1.75 C1 has the light sensor next to the storage indicator. The storage indicator is turned off briefly during each sample capture. XO-1.75 B1 and A3 do not do this.