It's an itty-bitty fraction of a Bitcoin that represents ownership of an asset.

That asset could be a bond (in which case payments could be made to all bondholders without knowing who they are pretty trivially by inspecting the blockchain), ownership stakes in a company (in which case stockholders could vote by signing one side or another of a decision with a private key corresponding to the public key to which the colored coin was most recently transferred), or tokens for smart property (in which case your car would ask you to sign a random character string which it would validate against the public key to which its ownership colored coin was transferred most recently).