I had this happen with my 4S after it fell in the bathtub and got wet. I retrieved it within less than 3 seconds, wrapped it in a towel and dried it off. In a panic I attempted to blow out any errant moisture with a hairdryer (no, no…). I also repeatedly powered the phone off and on (another no, no). The phone had remained on throughout the soaking and initial drying process. The only thing I noticed was some moisture under the glass in front of the rear camera lens. I kept a warm dryer on it until the moisture evaporated.
At some point I turned on the camera to test it and the LED remained lit. Even after powering the unit down, it remained lit. At first it was fully lit, and then over time it began to fade and remained lit dimly. Testing the flash feature, I could still get it to flash and using a Flashlight App I could also get it to strobe, but never turn off completely. All other features of the phone functioned fine. For what it's worth, upon inspection, only the headphone jack moisture exterior sensor was tripped, the power and (after removing the back plate) interior sensors were not red. I checked the camera connections, uninstalling the camera and putting it back in. Still the LED remained lit.
From researching online, I concluded that moisture had gotten into the camera and LED housing and there was a short keeping the LED lit. I ordered a new camera, disconnected the battery, installed the new camera and all appears to be fine!
What I'd do differently next time (had I had the tools): Immediately power down the phone after the first pat down with a towel. Open the back case and inspect the interior for moisture. I think heating the phone and blowing it out so much probably forced water deeper into the phone and ultimately compromised the LED. Had I just let it be and carefully dried it with the case open, I might have avoided shorting it out. A can of compressed air probably would have done the trick. I don't think much water had actually gotten inside, and it was just all the heat and evaporated water that was my real enemy.
Hope this helps someone.