A screencast would be great, any volunteer here ? :-)
After start the icon is gray and it means that there are no browsers connected to XRefresh.
XRefresh will watch for your modified files. But you have to tell where are your web projects located on the disk. Don't worry, you can simply drag&drop interesting folders onto configuration dialog.
In Firefox you need a latest version of Firebug. XRefresh acts as plugin into Firebug and has it's own tab panel in Firebug window. You need to enable Firebug for particular site to enable XRefresh functionality.
In Interenet Explorer 7 you can find XRefresh icon in the tools in the top right corner (the icon may be hidden in the chevron section).
The icon reflects the connection status. You may click it to open XRefresh Panel:
You should see active icon in the traybar.
Now, when you modify any file which passes the project settings, tray icon will flash and browser gets refreshed.