This simple device is designed to connect inline between your battery and your drone, and will protect your electronics in case of any electrical short circuits. Whether it's a bad solder joint or a mismatched wire, the Smoke Stopper will cut the power and notify you of any shorts.
Green means go - if the LED lights up then your circuit is good. If there's no light, that means that there is a short in your wiring. Once the internal fuse has been tripped, it will take a minute or so to reset; during that time the LED will come on dimly when powered.
Note: The Smoke Stopper is just one of many tools that should be in your electrical kit, and is not a magic bullet. It will not protect against all wiring errors, and you should always check your work with a multimeter before applying voltage.