Optically thin palladium films evaporated on different silicon-based substrates are investigated following exposure to different concentrations of hydrogen gas in air. Laser modulated reflectance off the palladium surface of silicon oxide, silicon nitrite and polycrystalline silicon substrates is used to recover information regarding changes in optical properties of the samples due to the absorption of hydrogen. Simple index of refraction arguments are sufficient to explain the results. Structural changes of the palladium films have been investigated using atomic force microscopy before and after hydrogen exposure. An interesting nanostructure formation is evident in some of the samples, leading to a possible means of fabricating nanodevices.