Lights allow you to illuminate the scene. You can select color, and range of effect for them. For now, not much features of lights are supported, but basic use is supported. Here we'll create a simple scene so you can understand how lights work.
Here we have a 3D scene, with a plane as a floor, and two geometric figures sitting on it. Also, the objects are using two simple materials with only a plain diffuse color: one for the spheres, and a second one for the floor: To create lights, go to the Create menu, and under Lights/Standard Lights, pick an Omni light, as currently it's the only type of lights that are supported. Then, click somewhere in the scene to add the Omni light. And here is the light. In the right part of the image you can see the effect it had on the spheres: Let's try it in the engine:
Something is wrong. The light isn't affecting the sphere that is more far away from it. When an object isn't affected by a light, it shows up as there were no lights: shadeless, only with diffuse color.
What's happening? We need to increase the range of the light. In the modification panel, look for the Intensity/Multiplier tab, and into it you'll see the “Far attenuation” parameter. Activate “Show”, and you'll see the light range of effect: As you can see, it only reaches after the closest sphere, so you need to increase the “End” parameter of the “Far Attenuation” until it covers the second sphere as well. Also, you can modify the light color: a darker or brighter color will define the intensity of the light. Here is the final result in the Engine: