Can webcams be turned on without the indicator light?

Most definitely, but in order to do this you would probably have to patch the camera's firmware and then flash it. Similar attacks have been used to disable the "shutter sound" on cameras.

Im not sure about built-in webcams, but I think it is most likely possible.

I've found info on Logitech Webcams, where you can turn off the LED in the registry keys..

For QuickCam versions 11.5.0.1169 thru 11.9.0.1263, LVUVC_LEDControl is located in the following registry key:

HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Class{6BDD1FC6-810F-11D0-BEC7-08002BE2092F}\0000\Settings

Note - If more than one camera is installed, you will have a "folder" for each device (i.e., 0000, 0001, 0002, etc...).

It has a default Data Value of REG_DWORD = 0x00000005 (5).

Based on your comments, I will assume that the following information is true:

0x00000000 (0) = LED Off 0x00000008 (8) = LED On

Please note that only certain cameras support this feature, so the mere addition of this key will not cause the LED Control buttons to appear in the QuickCam® Advanced Settings.

It is taken from: http://forums.logitech.com/t5/Webcams/Can-I-turn-off-red-LED/m-p/277305#M52816

Hence, I do not see why it shouldnt be possible for built-in webcams, since they also require drivers (mine is for example up side down after a fresh install)

It really depends on the type of camera, and how it is built. On Apple MacBook Pros (at least recent ones), the camera light is directly connected via the power supply to the camera module, so the light can't be circumvented even via a firmware hack. Older (really old) Logitech cameras had a similar design.

But just to be safe, I'm one of those guys with a dark tape over the camera.