The Status Window is the small, floating black window. It shows you the microphone status (the Red stop sign means the mic is off; the green circle means the mic is on; the "dream bubble" means it is sleeping).
Click on the microphone status icon to toggle between the microphone on/off. You can also say "Microphone Off" or "Go To Sleep" (and "Wake Up").
You can also turn the microphone on/off by holding down the Control key and clicking on the MacSpeech Dictate icon in the Dock to show a list of options. Or you can click on the microphone status icon in the Mac OS X menu bar at the top of your screen.
Under the Window menu for Dictate, you can choose "Show Status Window" and "Hide Status Window".
You can also uncheck the box "Show Status Window" under "On startup" in "General" in Preferences to hide the Status Window at launch (this is not recommended to hide the Status window, especially when first starting out).
More information about the Status Window, and ways to control the Microphone can be found in the MacSpeech Dictate User Manual and in the Help guide (both can be located under the Help menu).