The third LED is not used in automatic mode and is user controllable. It is actually LED 0 while LED 1 is the red one that indicates tracking.
From
CMUcam2_commands.pdf:
L1 boolean \r
L0 boolean \r
These commands enable and disable the two tracking LEDs. A value of 0 will turn the LED off, while a value of 1 will turn it on. A value of 2 (default) will leave the LED in automatic mode. In this mode, LED 1 turns on when the camera confidently detects an object while tracking and provides feedback during a send frame. In automatic mode, LED 0 does nothing, so it can be manually set.