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Correct, the raid leader sets these icons and they're seen by everyone in the raid. Actually anyone who has been "promoted" can set the raid icons... but mainly it's the raid/party leader.
The icons can also be seen through terrain. This means that if someone sets a raid icon on a mob who is around the corner from you, you can still see the icon.
If you target the mob, you will see the icon on top of the target's head. This is highly useful to make sure you targeted the right one.
The icons can be put on monsters or players heads.
Putting icons on the MT's head on AV is useful... gives us healers something to look for to heal.
And as I mentioned my above post, these might be called "raid" icons, but they're fully usable in a 5man party.
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