I just installed Prey, marked my MacBook Pro as missing, waited, and the light definitely did come on - albeit for around two seconds - while taking the webcam picture.
I did this test as well when I first heard about Prey. The first couple times when I knew the picture was going to be taken I did not see the light.
The reason is because we can only focus on one thing at a time. While waiting for the picture I was casually browsing the net -- probably reading HN -- and only periodically looking up to watch the light. I assumed a light source would catch my peripheral vision. It had not. For the third test I stared at the camera with an unbroken focus. Sure enough, the light turned on as expected.
Net: I could not see the light unless /I was looking at the camera/. It's a side effect of how the mind works and processes information. It's also important to keep this fact in mind when building interfaces: don't alert users in places they aren't looking. They won't see it no matter how red or many sparkles you add. :)
The reason is because we can only focus on one thing at a time. While waiting for the picture I was casually browsing the net -- probably reading HN -- and only periodically looking up to watch the light. I assumed a light source would catch my peripheral vision. It had not. For the third test I stared at the camera with an unbroken focus. Sure enough, the light turned on as expected.
Net: I could not see the light unless /I was looking at the camera/. It's a side effect of how the mind works and processes information. It's also important to keep this fact in mind when building interfaces: don't alert users in places they aren't looking. They won't see it no matter how red or many sparkles you add. :)