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There is a green bar below the user's picture when they're online.

Just switched back to check this out. I see the green bar under only one of my friends but the rest that are online or away don't have this. Do they also have to have hangouts enabled for me to see that?

Also, I understand that they are trying to make things minimal and look cool but it's not something that's very intuitive or noticeable. I thought it might have meant that I have a chat window open with that person.

How is hangouts minimal ? In old gchat you have lines of text - very efficient and natural. In new hangouts you have a lot of empty space, graphics and overall about 4x less text in the same amount of space. It's huge UI fail in my opinion. Fortunately there is still an option to switch back.

That's only online at a PC, I believe. If folks are on a phone, they won't have a green bar.

Only in the web interface, that feature is entirely missing from the Hangouts app that replaced the Google Talk app on Android.

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