You may already know that a standard switching relay makes or breaks a switching contact by moving the contact through the application of a magnetic field - generated by current flowing through the relay's coil.
An Indicator Relay works on a completely different principle.
In the diagram below, you will see that the Indicator Relay has a coil and a switching contact.
The coil is a Heating coil and the Switching Contact is a bi-metallic strip.
You may remember from your school days that when heated, a bi-metallic strip will bend.
The circuit shows that the Indicator relay is connected to a power source and in turn drives a bulb.
An important point to be aware of is that the resistance of the Heating coil in the Indicator Relay is significantly less than the resistance of the bulb.
So - how does it work?
To begin with, the Switching Contact is closed.
Current flows from the power source (the battery) through the Heating Coil, and through the bulb to the ground point (to the -ve of the battery).
This allows the Heating Coil to generate heat, warming the bi-metallic strip. The indicator bulb is lit.
As the bi-metallic strip warms up, it will begin to bend and will eventually open the Switching Contact.
When it does this, no current flows, the bulb is not lit and as no current flows through the Heating Coil it will start to cool down.
Eventually the bi-metallic strip has cooled sufficiently to close the contacts once again - causing current to flow again - illuminating the bulb and causing the heating element to start warming the bi-metallic strip again.
..... and the process repeats .... again and again .....
The on and off times are governed by the rate of heating of the coil and thermal lag in the device.
The impedance (resistance) of the heating coil is low and so the current flowing through the circuit (and thus the rate of heating) is determined by the resistance of the indicator bulb. This determines the flash rate of the indicators.
If you change the power rating of the bulb in the circuit (ie use a bulb with different resistance), it will flash at a different rate.
If you replace the bulb with an LED you will not allow sufficient current to flow and the coil will not provide enough heat to bend the bi-metallic strip and it won't flash .... unless you put a load resistor in parallel with the LED to give the same load as would be provided by a bulb.