The left button toggles whether you want the audio to playback when you're scrubbing across video clips. Sometimes that gets pretty annoying so you may want to click the button. The green meters tell you the volume level of your audio clips, independent of the volume you have set for your headphones or speakers. If your audio causes the two rightmost dots to light up red, iMovie is warning you that the volume of the clips is set too loud. Adjust these values in the Audio tab of the Inspector panel until the red dots stop lighting up during playback.
Here are the various palettes you can access from the rightmost end of the iMovie toolbar. Take note that you can also access these palettes from the Window menu, and the fifth button is not available in iMovie '08.