When the DVDO detects a 3:2 film(most DVD's are like this) it will light the blue LED. When normal video is detected the red LED is on. For simplicity the 3:2 option reduces the digital errors you may see because film speed and video speed (frames per second) are different. The DVDO and other doublers and scalers have the ability to detect this and rebuild the image correctly. If you do a search of 3:2 pulldown I am sure you will find a more technical description of my oversimplified answer...
P.S. The indicators change because of scene pauses or changes. This is normal and will not affect the operation of the DVDO when doing a 3:2 detection.
[This message has been edited by andyg (edited 08-22-2000).]