While the use of color in watches is often related to its design, there is also a practical side to them. Just as in nature, colors can have a function, and they can aid in the purpose the watch was created for.
Bulgari just released a new Diagono Scuba, not only with a white dial but also with an orange and yellow one. These are fun colors for the summer, but they also have a practical use. These colors can be seen at a much greater depth than others. Red is the first color to fade away under water, at about 15 feet, while orange and yellow stay visible much deeper.
While this is a bold use of color, it is often far more subtle. Watch manufactures use red to indicate that the power reserve of a watch is nearing its end, or have a tachymeter and telemeter scale on a chronograph in a different color so that they are easier to keep apart.
The same is often done with hands, or sometimes even subdials. The famous panda-dial was created to make it easier to read all the different subdials. Especially since chronographs are often used in an active environment, this allows the user to quickly yet accurately read the elapsed time.
Sometimes colors are also to be avoided at all cost. Most military watches feature a matt black dial to avoid reflections, as this could give away their position to the enemy. For that reason, most of these watches also have a matte case.
While colors can have a true function on a watch, these days they are more often used to appeal to customers and stand out among the competition. They have become more of a fashion consideration, rather than one of practical use. That is why we now have trends in watch colors (like the blue dials of Baselworld) and even watches with colored cases, increasing choices and making the watch world as a whole far more colorful!