Have you got the DVDA2 New Features document? It explains color sets much better than the manual does.

Essentially, a color set is a palette. You can choose four colors for each palette, and then decide which palette is use for various objects (specifically, menu highlighting and subtitles).

Each color set has a fill (foreground) color, an oultine/background color, an anti-alias color, and a transparent color. The first two are self-explanatory. The anti-alias color is what's used to "blend" the edges of an object. The transparent color is one that you want to be invisible.

See the aforementioned document for more detail.

Rob