Then either you are having a system wide problem or some settings in your account are broken.
Please check, if the same problem happens, when you try to run GarageBand from a different user account; you could try to log into the Guest account. Is the LED display there in GarageBand, when you sign in as another user? If GarageBand is working well from a different account, remove your GarageBand preferences - HangTime's fix for oddball problems.
Move com.apple.garageband.plist from the Preferences folder in your user library to the Desktop - see the FAQ:
http://www.bulletsandbones.com/GB/GBFAQ.html#oddballprobs
(Let the page FULLY load. The link to your answer is at the top of your screen)
This usually solves problems with unresponsive user interface elements - the preferences file stores the layout and settings of the interface elements, and if that file is corrupted, some controls may cease to work.
in MacOS 10.7. or later the User Library is hidden. To find the Preferences Files use the Finder's "Go" menu:
- Quit GarageBand, if it is running.
- Click onto you Desktop to bring the Finder forward.
- In the Finder Menu press "Go" and hold down the "option/alt" key, until your user library appears in the drop-down menu
- Select "Library" and in the Finder window that opens navigate to the "Preferences" folder; move com.apple.garageband.plist to the Desktop.
Log off and on again (don't skip that step!). Retry GarageBand and see if it GarageBand is now showing the LED properly.
But if GarageBand does not show the LED even in a different account, you need to fix your system. Did you install something lately, audio drivers, etc?