This is one of the handiest things I ever built! The light goes on when
someone picks up the phone and it goes off when they hang up. The circuit
is optically isolated from the phone line and it draws hardly any current
from the line. The LEDs are powered by a 9V battery.
Documentation
Here is the schematic. It is a similar design
to some of the circuits that I found on the internet. This circuit is duplicated
in my project because I wanted to have indicators for both phone lines.
Much of the design is built around what I had on hand. (For example, I
needed 2 mosfets, but all I had were high current ones--very overkill).