The iPod will always flash this when mounted. This is telling you that the iPod and the computer have established a connection. You should not disconnect the iPod with this flashing or you run the risk of corrupting the iPodis hard drive or the iPod database. Be sure to unmount the iPod before disconnecting it from the computer. In 3rd, 4th and 5th generation models, the iPod will change to the Main menu when it’s OK to disconnect. In 1st and 2nd generation models, it will flash ‘OK to Disconnect’ when it’s safe to disconnect.
Why does the iPod always flash ‘Do Not Disconnect’ when connected to my Computer?