Ice making in a freezer is largely automatic. The ice maker is equipped with sensors that can tell when the ice bin is not full, or when a new cycle begins. When this occurs, the ice maker sends signals to its water valve. While the water dispenser of the refrigerator has its own supply line, the separate ice maker line is only open for brief intervals, when the ice maker needs new water to freeze. This process occurs behind the scenes and is not indicated by LED lights.
The ice itself is formed in a small cup or shelf where water from the supply line is collected and then frozen. After a set time, this frozen cube is flipped into a waiting ice bin, which is one reason many automatic ice cubes are crescent-shaped. This cycle may run several times throughout the day to keep a steady supply of ice, depending on how much ice is used.
Where the LED controls come into play is the selection of ice itself. Many LEDs indicate choices between different types of ice. For example, you may be able to choose a different LED-lit option for crushed ice. This puts the cubes through an additional process, a grinder or bladed mechanism that crushes the cubes as they're dispensed. The signal sent by the push of a button both activates this extra step and lights the LED indicator to show the ice is now crushed, a simple but effective process.
LED lights and panels on ice makers serve an additional function. Even basic versions can light up to show if the filter is being used or if the water filter needs to be replaced. But more complex versions can also light up codes to indicate stuck ice makers or non-responsive parts. Sometimes ice can pile up and jam the ice maker. LED codes can warn you about these problems -- so you can fix them before they become more serious.