Colored jelly is a type of jelly that appears in some fanons. The way it works depends on the fanon it appears in.
One type of coloured jelly is the same as normal jelly, except it can only be cleared with candies of the same colour.
The other type appears in jelly colour levels, where it can be red or green. Hitting a red jelly will turn it green and vice versa. The objective is to turn all the jelly green in this case.
The red and green jelly was supposed to appear in jelly colour levels in the original game but was cancelled.