The Typing Status Indicator is a black animated circle which is located to the right of the text area where you type.  It sits still if no typing on the other side is in progress, and spins if the other side is currently typing.

Here's how it works.  Every 5 seconds it looks to see if the other person is still typing.  If the number of characters they have typed changes from the last time it checked, it will keep on spinning.  If they stop typing or erase their typing (changed their mind and decided not to say what they were previously typing) the indicator will STOP spinning.  Of course they have the ability to see if you are typing as well.

This will hopefully cut down on embarrassing moments when you leave the room thinking they are done with the session when in reality they are writing a book.

Enjoy!
Neal