This is the same surface mount led used with the Lilypad protosnap boards. They are designed to sew into clothing to make wearing electronics more accessible. Connect power and ground and you have a light.
Connect a microcontroller and you can control the on/off function of the LED. Using the Lilypad microcontroller you can also control the fade feature and the brightness of the LED on a scale of 0 to 255 (basically 256 shades) using the default Arduino functions.