To change the colour of an entity simply select it so that it's entity handles are displayed. The properties of the entity are displayed in the Properties Explorer, simply click in the 'colour' field and set the new colour as required.
If multiple entities have been selected then colour field within the Properties Explorer may be blank. This would indicate that the selected entities have a number of different colours, otherwise the field would contain the name of the common colour for all of the selected entities. Simply set the new colour as for a single entity.
This is asking you confirm that you want to change the setting of the highlighted entity to the new setting. Say 'yes' to alter the entity setting, say 'no' to leave the selected entity unchanged.