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The blue light can only be added to the level Sandbox in Halo 3 and only two at a time. The blue light casts a blue glow over a significant area, and is meant to be used to show that the base belongs to blue team. The blue light's counterpart is the Red Light.
If two blue lights and two red lights are added to the same map variant, they do not cast light, they just glow. On Sandbox, there is one Red Light and one Blue Light by default map type. A blue light placed near a red light casts a purple glow.
The Blue Light returns in Halo: Reach and Halo 4 along with various other colored lights.