Color Change changes the ability-bearer's type to the type of the move that hits it. For example, being hit by X-Scissor will turn the Pokémon into a Bug-type. Dual-type Pokémon will change to a single type.
If a Pokémon with Color Change has a Substitute, the ability does not activate. Color Change only activates after the last strike of a multi-hit move.
In Generations 3-4, Color Change activated on the first strike of a multi-hit move, so subsequent hits could be not very effective.