When referring to audio signals, coloration refers to changes to the signal spectrum. If, for example, an amplifier does not pass audio directly, but applies more of certain frequencies and less of others, the signal has undergone coloration.
It is very difficult to design devices, especially reverb units, to avoid coloration, thus an 'un-colored reverb' will be an expensive unit.
Applied correctly, coloration can make a signal more interesting; with words like lively and warm used to describe the results. Equipment such as a Marshall Stack will add a distinctive color to sound, and these are often simulated by pre-amps designed specifically to not be colorless. The Joemeek range of effects is a particular example.
Another example of coloration is in pink noise. This is a white noise signal which has undergone coloration in favour of the lower frequencies.