Recently I found this cool new setting which makes the back LED adjacent to the camera in iphone 4 to blink when you receive a call, message or notification.
After some digging out with the option under settings on my iphone, I came to know that this can be possible only on iphone with back LED and it should have iOS 5 or later running on it. OS 5 has this feature targeted to the iPhone 4.
To enable this feature, go to Settings > General > Accessibility, and turn LED Flash for Alerts ON, your iPhone camera flash will now flash when receiving a call or an alert as shown in the image below.
The video below shows how does this setting work when enabled.