At least one node must be selected to use the dialog. If multiple nodes are selected, the change in color will apply to all selected nodes.
The Color Dialog does not necessarily act on the selected node, but rather the attribute that the selected node is colored by. For instance, if a "senators" entity is colored by "party" then changing the color of a senator will change the color of the party node, and all the senators nodes in that party.
If the selected node is colored by "cluster", then changing the color of the node will change the color of the cluster. See also the cluster dialog.