The player is currently using Molotovs
The grenade icon in Far Cry 3 indicates which type of grenade you currently have equipped.
There are two main types of grenades to cycle through: the frag grenade and the molotov cocktail.
The icon will change depending on which type of grenade you have equipped. Grenades can be cycled using the middle mouse button or the bumpers, on PC and Consoles respectively.