Hi Freddie,
The LED is the Status LED; see Getting Started - Downloading a Program in the Handbook.
It is used to indicate the mbed has power, and flashes to show activity such as saving files on to the mbed, downloading a program in to the microcontroller internal FLASH after hitting reset, and on any serial activity between the mbed and the PC.
We don't currently have a way to turn the LED off, and to be honest, the power saving by turning it off will actually be negligible at the moment compared to the other things on the board. We might do some experiments in the future to see if we can do a low power mode for the interface, so i'll make a note of the idea of being able to disable the LED too.
Thanks!
Simon
What exactly does the LED above the Reset button mean. I see it flashes upon a power-up and it also flashes during USB communications with the PC (during programming and when sending data to the PC).