It would probably only be possible if someone who had physical access to your computer installed some kind of software that activated the webcam at random intervals. If your webcam was on the green light would be illuminated.
Yes as Iduel said, if your webcam was on for whatever reason, so would the green light be. If your really worried about people seeing you through your webcam, do the old post it note trick, and tear a bit off of it over the webcam, or leave photo booth open all the time (its a bit of a resource hogger sometimes) so that no other application or service can access your cam