Before resetting the PRAM check if there could be maybe some other reasons why your iSight is not working properly. To do so you can follow the instructions of this apple support page http://support.apple.com/kb/HT2090 (steps 1-3).
If your iSight is still not working (but red light is flashing) you have to reset your PRAM.
1) You have to shut down your computer.
2) For resetting you will need to press (step 4) the following keys on the keyboard:
Command, Option (german boards: alt), P and R
3) Turn on the computer.
4) Promptly press and hold the the key-combination (Command, Option, P, R). You need to do this before the gray screen appears. Keep holding the keys until the computer restarts again and you hear the start up sound for the second time. This start up sound will be louder than normal.
5) Release the keys and proceed with the log in as usual.
More info can be found here: http://docs.info.apple.com/article.html?path=Mac/10.6/en/26871.html