I almost got into a packing lot fender-bender because, apparently, my reverse lights aren't working (I verified this--they work sometimes, and they worked enough to pass inspection recently, but unless I hold the (automatic) gear shift in just the right place, and I don't know what that is, the lights don't work). Is there a switch or something that needs replacing? Is it expensive? Can I fix it myself?

Thanks!

The PNP switch controls the back up lights. A slight adjustment is probably all that is needed. Read the following, especially where it talks about adjustment:

http://volvospeed.com/volvo_repairs_how_tos/transmissions_driveshafts/pnp_switch_replacement.html
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My name is Klaus and I am a V ♂ lv ♂ holic

Thanks Klaus!

Are you referring to the section that shows the adjustment using a special alignment tool available from Volvo, etc.? It looks terribly involved and seems to threaten things like cruise control, transmission lines, and other things. Is it as daunting as it appears? I may just figure out how to hold the gear shift so the light stays on! :)

The best way to align it is using the back up lights! No special tool required. Just loosen and move so the back up lights are on when in reverse (without holding the shifter) and tighten it back up.
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My name is Klaus and I am a V ♂ lv ♂ holic

So, that would suggest that removing the battery is not necessary after all, correct? Which step in the process listed on that volvospeed link would I actually complete to make this happen.

As always, thanks!

Remove air cleaner and intake from radiator. The battery shelf might be in the way to access the 2 bolts you need to loosen/tighten the PNP. Do not disconnect any vacuum lines.

Klaus
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My name is Klaus and I am a V ♂ lv ♂ holic

Help!

So, I loosened the PNP switch and moved it slightly until the reverse lights stayed on, tightened it all back up, and put it all back together thinking the problem was solved. Then I turned the car on to pull into the garage and the two transmission lights ("Sport" and "Winter") were flashing, as was the transmission arrow on the dashboard display. When I put it into gear, the car seems to be starting in fourth or third gear.

I "cycled" the shifter through all the gears with the ignition on but the engine not running, turned the car on and did the same, and then drove it. It seems to be running fine and the transmission is shifting normally, the reverse lights come on when I put it in reverse, but the transmission arrow on the dashboard display and the sport and winter mode lights near the gear selector are still flashing. What is my next move?

As always, thanks!

Three months. I guess with it getting darker now, you want a little light behind you when you back up.

You did OK, but you might have 'moved' the PNP too far. So long as the lights blink, there is a tranny error code. Your best bet is to go to an autoparts store, borrow the scanner and erase the codes. If they come back immediately or do not erase, try 'rowing' the shifter about 20 times from R to L with the engine off.
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My name is Klaus and I am a V♂lv♂holic

As always, thinks!

What if the lights continue to flash after I erase the codes and try th shifting thing, but it still drives OK? Need I worry? Will I cause any damage by driving around with the lights flashing? (I saw a suggestion to just put a piece of electrical tape over the flashing arrow, but it strikes me that the warnings are there for a reason). Thanks again!

When the lights flash, the TCU puts the tranny into limp home mode. Start ups are in 3rd gear, it will shift to 4th but not engage the lockup. You can still shift 'manually', L - 3 - D.

Putting in a new PNP is not a big deal and will solve your problems for the next 150K miles.
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My name is Klaus and I am a V♂lv♂holic

Well, the lights stopped flashing--I thought the problem was solved, but the reverse lights are now not working. I guess I am back to square one. At this point, would you recommend simply buying and installing a new PNP switch?

Thanks again for all the help.

When the grease in the PNP solidifies, the contacts get worn and burn. You tried real good, but a new PNP is your best bet.
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My name is Klaus and I am a V♂lv♂holic

Order a new PNP switch! The grease dries out (inside) and all the switches get intermittent. In cold weather you will have problems with proper shifting. Adjust the new switch using the back up light trick.

I think that'll be the next step! Thanks!