By default entities are color 'ByLayer' which means the entity will show the color assigned to the layer. It's also possible to assign a specific color to an entity which will overrule the layer color. With 'Color Random' it's possible to assign a random to the entities you select. You can make a selection of colors by selecting entities. If the entity has a specific color, that color will be stored, other wise the color of the layer the entity is on will be stored. For every entity the command will pick a color randomly from your selection and will apply it to the entity.