Missed calls are calls to you that you did not answer. Your system administrator can also configure whether or not the log includes calls presented to you but are answered by someone else or by voicemail.
The button is illuminated when you have any new missed calls in your call log. The lamp is extinguished when you have viewed the missed call in the call log or the record of that call is no longer in your call log.
The icon is also shown at the top-right of the phone display to indicate new missed calls and shows the number of missed callers or for more than 9 missed callers.