How does the charge indicator lamp work?

Partly, it is intended to warn if the alternator stops delivering charging voltage, but the main purpose of the lamp is to provide initial magnetization of the alternator winding so that it can start “producing” electricity when the alternator reaches a sufficient speed.

The charge indicator lamp is located between the ignition switch and the alternator field terminal (D+). When you turn on the ignition, voltage flows through the battery lamp down to the alternator’s D+ (which actually has earth potential when it is stationary) and pre-magnetizes the alternator winding. Then, when the engine is started and the alternator reaches a certain speed, the alternator starts producing electricity and D+ gets a positive potential. In this state, the battery lamp receives positive voltage from the ignition switch, but also a positive potential from D+, and the lamp then goes out.

Despite its name, the charge indicator lamp only lights up before charging has started and goes out once charging is underway.

If your alternator does not have a D+ terminal, you can find alternative designations here.