As far as I can tell, the flashing colors appear pretty random. Supposedly, the "Value Pack" is coming out today that will offer, among other things, refined control over the colors.
You can install light manager from the play store to choose custom colors for notifications. You will need to enable third party app support for the light in display songs though.
The value pack let's you choose from 5 colors. And it is blocking my Lightflow from working (which has more colors and features). I wish I could uninstall the value pack.
When you’re living in the fast lane, anything that saves time is worth it. Optimus F3’s Home Button LED displays flashing lights in color specific patterns, quickly alerting you of missed events, incoming calls, alarms, or texts from your friends. It’s a super-quick way to read between the lines, before you even see what’s on your phone’s display.