Detecting Motor Overload
You insert a small value resistance in series with the motor. The resistance needs to be low value (maybe an ohm or less) so that it doesn't significantly reduce the power capable of being delivered to the motor.

An amplifier then amplies the voltage across the resistor so that instead of 200mV representing 200mA through a 1 ohm load, more like 2V represents the motor current. This is about the voltage needed to turn on a LED. Altering the gain of the amplifier turns the LED on at different currents.

That's how it is simply done.

To implement this you can put a resistor of (say) 1 ohm in the negative return path of the motor and use an op-amp (with inputs capable of going down to the negative rail) connected to said resistor. The -V input connects to 0V through a 1k resistor and the +V input connects to the junction of the current-sense resistor and motor via a 100k resistor. 

Apply a 10k feedback resistor between op-amp output and -V input. The output of the op-amp is capable of driving a LED (well most of them are). You need to power the opamp of course; Vpos_supply to 5V and Vneg_supply to 0V. 

Use a 100nF decouple capacitor on power pins of op-amp and use a current limit resistor in series with your LED.

For some reason I am unable to draw this circuit using the circuit tools? This makes it difficult to visualize for sure and it doesn't make it any easier to describe it so if i've made a mental error will someone please tell me?