Without light, most characters will not be able to see. Light comes in several levels, based upon the phases of the moon. Indoor light will be set to match one of these. In daylight, everyone will see everything. As the light diminishes, so will the information you automatically receive. At low light, you will no longer see objects and other people in the room will appear as nameless "someone"s. With less light, even the anonymous people disappear, along with the automatic exits from the room (you will have to manually type exits as you need to look around to find them). Some races and special characters will have varying degrees of night vision (see: Trollocs and Wolfbrothers) which will enable them to function normally at lower light levels.
Characters with a light source (lantern, torch, etc...) will generally be able to see normally in any conditions. However, some small lights, such as torches, may only raise the light level by a notch or two. Wise adventurers always have a spare light in case they become stranded in a dark patch of the world.