In this mode, Ableton Link acts as a MIDI slave to an external MIDI clock by manipulating the Ableton Link tempo to keep it in sync.

The status pips can show in the following combinations:

MIDI Ableton Link Meaning...
Red Red No incoming MIDI clock (won't sync)
Red Yellow Waiting for incoming MIDI clock (waiting to sync) 
Orange Orange Incoming MIDI clock; not received MIDI start (tempo only sync)
Green Yellow Incoming MIDI timeline; Link not yet in sync
Green Green Incoming MIDI timeline; Link is in sync