Technically its a representation of three numbers between 0 and 255. Each number is assigned to a color: the first is red, the second is green, and the third is blue.
In binary this would be xxxxxxxxxxxxxxxxxxxxxxxx. Each X can be 0, or 1.
However, the <color:> tag uses hexadecimal. This means you can go from 0 to 9 and then there's A (10), B (11), C (12), D (13), E (14), and F (15).
Now, it's so natural that we do it subconsiously, but in our numbering system, each place has a multiplier.
1000 100 10 1
x3 x2 x1 x6
3000 + 200 + 10 + 6 = 3216.
Same thing with hexadecimal.
256 16 1
x0 xf xf
0 + (16x15=240) + 15 = 255.
Hope this helps!