Must be the most common post to this board and I can't for the life of me figure out why the NHTSA hasn't issued a recall. Serious shortcoming for the 96 and 98 model years.

After a few diagnostics, you will most likely need to have the ABS control module replaced (or, if you follow Vitor's link below, fixed). The 1996's sometimes have a minor wiring crimp problem, but usually there's a ruptured circuit on the PC board. You can remove and replace yourself if you're somewhat handy with tools. But I would recommend you get the diagnostics as there are telltale codes. (There in't a code for "bad ABS module." The codes are more cryptic, and an experienced Volvo tech knows that, for example, a code for "bad right rear ABS sensor" in a 98 usually means bad module since that's the circuit that usually gets broken.)

Cost for a new part is $358 on the internet, $416 at the dealer. Volvo or an indy will add a couple hours labor, minumum, if they do the R&R.

Vitor charges $125 to repair. You remove it and then overnight it to him, he tests, fixes, re-tests, then returns it to you. See his post below for a link to his website.

As long as the light is on, or the module is out of the car, you have normal brakes but no ABS or Traction Control.
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David
1998 S70 T5SE // misc mods (mostly lighting) // red calipers
1992 940 GLE // Hella Micro DE foglights and 170K