Finally, that colorwork post I promised...
My favorite way to use color is with stripes in crochet. Of course I love fairisle knitting, but I don't always want to cart a chart around and worry about whether I put the Post-it/row marker in the right spot the last time I set it down. I also like working on things I don't have to think about, and stripes are a great way to make a larger object out of the 50 gazillion single skeins I bought "just to pet" that all happen to go together because I really like blue.
Why crochet, you ask? Because, unlike knitting, each stitch is its own unit and dips down a little into the previous row (kind of like what happens when you make stripes in garter stitch, if you're a knitter). Also, a lot of crochet pattern stitches can be done one row at a time, rather than taking several rows per repeat. This means that it's a lot easier to get different looks with different rows. If you mix pattern stitches and stripe, you can end up with something that actually looks kind of like fairisle from a distance and still looks really good close up.
How to put the colors together? I like to have at least three colors going at once (one row a piece). This way, you never have two consecutive rows of the same thing. Keeping the stripe pattern to one row each keeps the final look from being too stripy.
I start by making a pile of all the little bits and pieces that I think might go together. Then I line them up so that I think they shade nicely from one to the next. It's also good to make sure that each consecutive grouping of yarns looks ok together (as many yarns in a group as you plan to use in a repeat).
For this example, my theme was blue, and when I lined them all up, they shaded from blue and brown earthtones through sky blues. Most likely you will end up with one or two yarns that you have more of than you do of the others, and that's a good thing, it will help with unity. Try to make sure all the yarns have roughly the same thickness--if your working primarily with worsteds, a dk or two is ok but avoid fingering, that kind of thing.
What do different combinations do? Like I said, try to keep the weights somewhat uniform. Don't worry too much about fiber content or texture unless their are allergies or washing instructions to consider. Really, though, this is something to do with all those onesies and scraps in your stash. That said, having all the yarns be about the same shade or of similar colors gives a really subtle, but rich look, as demonstrated in the first photo. Having similar colors with one bright or contrasting color really reinforces the fairisle concept, like so:
Of course, several contrasting yarns will look like stripes:
In the case of the sample that these photos came from, I was working in the round with groups of four colors. If I had worked in rows, a pattern would have emerged with the stripes, where some yarns would have repeated closer together than others, which can be a very nice effect. When working in rows, I like to combine that effect with different groupings of single crochet-oriented rows and double crochet-oriented rows. When working in the round, the side that is normally the wrong side can change the interplay of the colors in interesting ways, giving you something else to play with.
What all of this means is that it's really good to swatch before starting the project to figure out what combinations of stitches, number of colors, and which side of the work looks best.