How does Azure check the WorkerRole's status?

I think the mechanism is the same as the one used for WebRoles

the Azure RoleEnvironment performs a StatusCheck - see http://msdn.microsoft.com/en-us/library/microsoft.windowsazure.serviceruntime.roleenvironment.statuscheck.aspx

If you want to tell the service you are busy then call SetBusy() when this event fires

Here's a blog post that describes how the Windows Azure Fabric Controller monitors instance health.

Aside from that, the controller calls a StatusCheck event, every 15 seconds, that you can handle. If you want to pull yourself out of the load balancer (maybe based on some internal data your instance has), you just call SetBusy() on the RoleEnvironmentStatusCheckEventArgs object. This takes you out of the load balancer until the next check.