The timer0 interrupt can be easily configured for an interrupt. I have worked on PIC micro-controller embedded software for nearly 4 years with MPLAB, MPLAB X IDE environment. Below is my propsal for both the things:
1. Timer0 handling with interrupt:
The timer0 initialized as free running timer on with overflow interrupt enabled. In interrupt service routine, LED toggling will be performed using one of the GPIO of controller.
Also we can utilize the timer0 as time base with which we will glow LED for certain period (say 3 secs) when any of the external event occurs.
2. Interrupt handling:
The interrupt handling routine for hardware interrupt can be explained as below:
a. Switch on Interrupt pin. Pin will be by default pulled high to VCC with 10k resistor. On switch press, pin will be shorted to GND.
b. Whenever the switch is pressed, LED on any of the GPIO of the controller can be turned ON indicating the interrupt has occured.
For a digital watch embedded system,
On external event such as button press, turn on LED which will act as backlight for 3secs which will be counted by timer0 overflows.