"My guess is that it does some kind of duty cycle control to get the light levels and it also controls the light of the led, so I was wondering if someone could give some information on how can this be done.
"

You seem to have guessed everything - correctly.

I think what you need to do is PWM of the signal going to the LED.

The Intel Cookbook on PCA in the links to the left has enough details on this.

Raghu