Starting with the colorless D colored diamond and moving down the spectrum towards fancy yellow, each stone will have varying degree of color allowing the dispersment and refraction of light. The colorless (D) diamond will allow the maximum light to pass through and reflect all the colors of the rainbow.
The differences from one grade to the other are very subtle and it takes a trained eye and years of experience to distinguish the subtle differences.

Below is a diamond color chart representing the scale used for different diamond shades. As you move to the right the hues become stronger and price points can drop significantly.

Diamond Color Chart