Here's a couple of things I found on the SAL/ACL forum:
ACL - The rule book (Rule 17-A) required the use of the Mars light when
ever the train was moving forward at night. It was to be turned off
when approachin terminals, junctions, meeting points, and stations
where stops were to be made. Also, it was to be turned off when ever
the rules required that the main headlight be dimmed.
Before there were Ditch lights, there were Mars Lights
During the spring of 1936, an astonishing sight stopped motorists and
attracted crowds of curious spectators to highway overpasses along
the Chicago & North Western line from Chicago to Minneapolis. The
engine was one of the railroad's rebuilt Pacific-type set aside for
service on the famous "400s," but the oscillating blue light flashing
from the top of the smokebox was definitely something new.
The light was the brainchild of a Chicago city fireman, Jerry
Kennelly, whose encounters with oncoming street traffic during
emergency runs led him to tinker with various warning-light devices.
The most effective, he discovered, swept the path in a horizontal
figure-8 motion that caught the attention of motorists both in front
and to the sides of the truck. But it wasn't until Chicago candy
magnate Frank Mars and his wife, Ethel took an interest that
Kennelly's invention became reality. Mars offered the inventor use of
the candy company's machine shop to turn out prototypes, and after
Mars' death, his widow continued financial support of the project. In
return, Kennelly assigned patent rights to the Mars Light Co.
Working with a group of Chicago policemen, Kennelly developed the
device further, offering it to railroads for use at highway
crossings. Finally, it caught the attention of Chicago & North
Western's chief safety officer; he agreed to mount a Mars light on
engine #2908, one of the four E-2's assigned to the new "400"
service. Additional tests were conducted with a Mars light on a
J-class 2-8-2 that shuttled back and forth on the Orchard track in
Proviso Yard.
On one of its runs to Milwaukee, the 2908 struck a large bird,
shattering the blue lens. A clear lens was located in Milwaukee, and,
on the return trip to Chicago, it was discovered that the white light
was even more effective in catching attention. Gyrating in a
horizontal figure-8 that was 800 feet in diameter, 1000 feet down the
track, the new Mars oscillating headlight was adopted by C&NW for its
steam-powered engines and, despite the initial indifference of EMD
officials, by the Rock Island for use on its first passenger diesels.
Other railroads soon followed.
(from Chicago & North Western Vol. 1, by Lloyd A. Keyser, Morning Sun
Books, 1997. Thanks to Charlie Willer, Heartland Rails, Ft. Wayne, IN)
From what I found out a while back, Seaboard used them for emergency situations, but don't know what defined an "emergency". Also, some of Seaboard's E7s had red lenses, others had clear.
