I "accidentally" muted the iPad (four finger up, slide to the left, push mute button). After that in iBooks an interactive book didn't play ambient audio, which is OK if you remember the muting. But it was playing other sound effects which was confusing. I thought that something is wrong with the iBooks app.
After hours I noticed the muted button…
(My mute switch on the side is changed to screen locker.)
Best Answer
iOS does not have an option for this, nor does apple approve apps which alter the status bar. If you want this function you will have to jailbreak your iOS device and install a third party status monitor. As pointed out in another answer, LockInfo does this. SBSettings used to, but no longer does. If you're running an iOS 4.x device, OpenNotifier might be useful as it does this as well as give you pull-down notifications similar to android and iOS 5.
If you're developing for this device, however, you can add this function yourself. As a developer you can run custom code without jailbreaking the device - you just can't submit that code to the app store.
The trick, then, is going to be finding example code for this feature. I expect someone in the jailbreaking community will have some info on what the code needs to do, and if you're lucky you'll find an open source project for it. Then you can compile and sign it yourself, and as long as you keep your ad-hoc license current and recompile/re-sign it yearly, you can use it on your personal devices.
I think a lot of developers overlook the fact that they can run any code they want on their own devices without jailbreaking. They can also distribute such apps in a limited manner to their friends using adhoc distribution as well.
It looks like OpenNotifier is open source, and has the functionality you need:
https://github.com/n00neimp0rtant/OpenNotifier
I don't know much about the status of the project, but it might be usable for you as a developer to bring this functionality to your devices.