Your Colors section in your Theme Editor is broken up into two pieces, Color Palette and Color Schemes.

The Color Palette is a group of colors that will be used as the default colors for your site and will show up throughout your Page and Theme editors so you can easily select them.
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For example, if you're in the page editor and want to change the color for a heading block, you can select the text block and click 'Edit'. From there, click the color drop-down menu and a box will pop up allowing you to change the color for the text. By default, the colors in the Color Palette will be available for you to easily select them.

Color Schemes are like more specific Color Palettes that can be applied to entire Blocks or Sections. To learn how to apply them check out our articles on Block Options and Section Options!

Each color scheme will give you a wide variety of customizability allowing you to set your own custom colors for things like the Background of your block or section, your Button color, and even the color of your links!